BoJ rate hike bets and intervention risk support Japanese Yen rebound from two-month low

• BoJ rate rise expectations and intervention concerns underpin the JPY, leaving USD/JPY edging lower on Thursday.
• Geopolitical uncertainty and expectations of a hawkish Fed provide support for the USD and the pair.
• Calling a top in the pair remains premature given the fundamental backdrop.

Having reached the psychological 160.00 level on Wednesday, its highest since early September, USD/JPY faces selling during Thursday’s Asian session, ending a two-day run of gains. Yet the pair has proved resilient below the mid-159.00s. With fundamental signals mixed, positioning for further losses calls for caution.

Wholesale inflation rose by 0.7% in October, its first increase in three months, according to the preliminary Corporate Goods Price Index (CGPI) released by the Bank of Japan (BoJ). The annual rate also picked up, reaching 7.1% from September’s 6.8% and reinforcing the argument for an imminent BoJ interest rate rise in December. Meanwhile, a warning against excessive FX volatility from Japan’s top currency diplomat, Atsushi Mimura, heightened the risk of intervention and lent modest support to the Japanese Yen (JPY).

Following a two-day advance to its strongest level since April 2025, the US Dollar (USD) is consolidating, putting some downward pressure on USD/JPY. Support for the dollar nevertheless persists as markets increasingly accept that the US Federal Reserve (Fed) will raise borrowing costs again, with a large 50-basis-point (bps) increase possible in December. The US-Iran standoff also keeps a geopolitical risk premium in place, providing additional backing for the safe-haven Greenback.

Hopes that negotiations could end the conflict grew after President Donald Trump indicated that further US military action against Iran was unlikely for now. Nevertheless, Iran’s Qeshm Island has come under repeated US strikes, while Tehran has targeted an Omani island used to assist ships navigating the Strait of Hormuz. These developments curb expectations of a diplomatic settlement to the US-Iran conflict. Together with bets on a hawkish Fed, they favour USD bulls and suggest that buyers could emerge on dips in USD/JPY.

USD/JPY on the daily chart

USD/JPY Retains a Bullish Near-Term Bias

Above the 100-day Simple Moving Average (SMA) at 158.99, the near-term outlook for USD/JPY remains bullish. The pair is consolidating just below 159.75, the 61.8% Fibonacci retracement of the 152.88–164.00 advance, with the 78.6% retracement at 161.62 next above it. Initial support lies at the 100-day SMA of 158.99, followed by 158.44, the 50.0% retracement. If the pullback deepens, the 38.2% level at 157.13 would come into view, ahead of lower structural support levels at 155.51 and 152.88.

(The technical analysis of this story was written with the help of an AI tool. Know more.)