See also: InstaSpot trading indicators for USD/JPY
The pair continued to fall on Tuesday and is trading near 154.00 at the time of writing, marking two-month lows. The Japanese yen is posting its strongest gain since February amid a radical revision of the Bank of Japan tightening expectations and confirmation of record currency market interventions. Downside pressure on the pair is intensifying despite persistent hawkish expectations for the Federal Reserve after a strong US labor report.
Key drivers
Expectations of BoJ tightening have moved to a new level. Markets now largely price a 25-bp BoJ rate increase at the September 17–18 meeting and consider the possibility of another hike before year-end. Even Takaji Aida, the prime minister's economic adviser historically known for a dovish stance, now expects a September increase followed by further tightening. BoJ board member Hajime Takata has allowed for sequential rate increases, a powerful signal for markets. CFTC data show speculators aggressively covering yen shorts—nearly 29,000 contracts were cut in a week, indicating a potential short squeeze.
A short squeeze is a situation in which price rises sharply because traders with short positions are forced to cover by buying back the asset, creating additional demand and a cascading rally.
Confirmation of large-scale interventions supports the yen. Japanese authorities confirmed record foreign exchange interventions: international reserves fell by $76.6 billion in August, and the finance ministry reported about $98.6 billion of sales to buy yen. This was a coordinated intervention involving the United States, lending it particular impact. Markets realized that intervention threats are no longer empty rhetoric, which radically changes the risk calculus for yen shorts. Authorities signaled they are ready to act aggressively to defend the currency, especially given Japan's critical dependence on energy imports via the Strait of Hormuz.
Conflicting Fed background. Strong US payrolls on Friday raised odds of a September Fed hike to about 60–62%. However the dollar has not been able to leverage that impulse into a sustained recovery because yen strength remains the dominant market theme. The coming US inflation prints (PPI and CPI) this week will be key to determining USD/JPY's next leg. High inflation could support the dollar and prompt a bounce in the pair; low inflation would strengthen the yen and deepen the downtrend.
Brief technical analysis
The technical picture for USD/JPY has deteriorated sharply. The pair has broken a series of key supports and hit two-month lows. Indicators display strong bearish momentum. Price is well below key moving averages—the 50-day (159.25), 144-day (158.75), and 200-day (157.90)—and is plunging further into a medium-term bear market.
Indicators:
- RSI (14) is near 25–26, indicating oversold conditions and strong bearish pressure.
- Stochastic has entered oversold territory, and OsMA sits well below zero, confirming the dominance of the bearish impulse.
Key levels:
Resistance levels: 154.00 (nearest resistance and round level), 155.00 (former support, now resistance), 157.00 (W1 EMA50), 157.15 (H1 EMA200), 157.90 (D1 EMA200), 158.00 (psychological).
Support levels: 153.00 (round), 152.90 (today's and weekly low), 152.00, 151.20 (W1 EMA144).
See also: USD/JPY: scenario dynamics for 08.09.2026
Events to watch
- September 10—US PPI: high inflation = support for USD and possible pair rebound.
- September 11 — US CPI: KEY EVENT. High inflation = support for USD and reduced downside on the pair; low inflation = stronger bearish trend.
- September 15–16 — Fed meeting: hawkish signal = potential USD/JPY support.
- September 17–18 — Bank of Japan meeting: KEY EVENT. A BoJ hike = further yen strength and pressure on the pair.
Conclusion and recommendations
USD/JPY is under strong bearish pressure driven by a BoJ policy paradigm shift and confirmed large-scale FX interventions. Key events shaping the near-term trajectory are US inflation prints and next week's central bank meetings.
For short-term traders:
- Trading from current levels is risky due to oversold conditions. Prefer short entries on a break of support at 153.50 with targets at 152.00–151.20 and a stop loss above 155.50.
- Long entries are risky and should be considered only on an aggressive rebound after soft CPI with a sustained close above 155.00.
- Monitor US inflation data and comments from BoJ and Fed officials closely.
For medium-term investors:
- The fundamental backdrop for the yen has improved. Initiating long USD/JPY positions at current levels looks premature.
- A pullback to the 151.00–151.20 zone (W1 144-EMA) could be used to scale into long positions cautiously if Fed hawkishness persists.
- The key risk to the bearish scenario is a BoJ decision not to hike in September or unexpectedly strong US inflation.
Risk management:
- Expect heightened volatility on changing BoJ expectations and intervention risks.
- Use strict stop-loss discipline, especially when trading breakouts of key levels.
- Follow BoJ commentary and US inflation releases closely.
*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.
¡Los informes analíticos de InstaSpot lo mantendrá bien informado de las tendencias del mercado! Al ser un cliente de InstaSpot, se le proporciona una gran cantidad de servicios gratuitos para una operación eficiente.
