The USD/JPY technical outlook shows sufficient momentum, while pressures on emerging currencies like the rupee are also evident.

The outlook for the Japanese yen policy remains unclear, and depreciation pressures are difficult to ease

Recently, a legislative group of Japan’s ruling party proposed drafting a large-scale supplementary budget exceeding 25 trillion yen to support Prime Minister Fumio Kishida’s economic stimulus plan. This move has sparked market concerns over government debt pressures, with the 40-year Japanese government bond yield reaching a historic high. Against the backdrop of such fiscal expansion, the Bank of Japan (BoJ) policy outlook remains uncertain—Fumio Kishida emphasized that Japan still faces deflation risks and hopes the BoJ will achieve its targets based on wage-driven inflation rather than relying on food price increases. Her stance on BoJ rate hikes is clearly negative, which will further delay market expectations of policy tightening and is a key factor behind the recent poor performance of the yen.

Technical outlook indicates USD/JPY may continue to rise

In Wednesday’s Asia-Pacific trading, USD/JPY received continuous support above the 155.00 psychological level, and oscillators show positive signals, indicating a bullish technical bias for this currency pair. The exchange rate touched a low since late February but maintained strong upward momentum. From a technical perspective, breaking through the 156.00 round number is highly probable; if momentum continues, the price could rise further to the 156.50-156.60 zone, with targets then shifting toward 157.00 and around 157.35.

On the downside, if a corrective pullback encounters resistance near 155.00, the pair may approach the 154.50-154.45 zone. This level should be viewed as a critical turning point—if broken, USD/JPY could face further downside pressure, with targets moving toward the 154.00 round number and extending to support zones at 153.60-153.50 and 153.00. Meanwhile, other emerging market currencies like the rupee against the dollar also face pressure from the strong dollar.

Market participants remain cautious, with policy intervention expectations rising

An increasing number of market participants expect Japanese authorities to intervene in the foreign exchange market to curb further yen depreciation, leading short sellers to hold reservations about new positions. Global risk aversion sentiment also provides some support to the safe-haven yen, with the overall decline in stock markets further limiting the yen’s downside.

On the other hand, although the dollar should theoretically be supported by fundamentals, concerns over economic momentum slowdown caused by the longest U.S. government shutdown in history, as well as market doubts about the Fed’s future policies, have constrained the dollar’s rally. Fed Vice Chair Philip Jefferson stated that the central bank needs to proceed cautiously, and Governor Christopher Waller continued to defend further rate cuts, which weaken the dollar’s attractiveness.

Key economic data will dominate short-term trends

The upcoming release of the FOMC meeting minutes later this week will have a decisive impact on dollar price movements. Subsequently, market focus will shift to Thursday’s U.S. non-farm payrolls report—this data is expected to provide substantial price momentum for USD/JPY, and traders should closely monitor this key release to adjust their positions.