USD/JPY pair regained ground near 158.23 on Thursday as the Japanese Yen weakened despite stronger-than-expected Japanese current-account data. The pair was up about 0.13% during early European trading, while the US Dollar remained supported by elevated Treasury yields. Japan’s August current-account surplus reached ¥4.062 trillion, exceeding the ¥3.195 trillion market forecast and the previous ¥2.989 trillion reading.
Yen Faces Conflicting Policy Signals
Japan’s external balance delivered a positive signal for the Yen, but domestic policy expectations remain more complicated. The August surplus was supported by a larger primary-income surplus, while exports also benefited from strong demand for AI-related electronics. However, imports increased faster than exports, partly because of higher crude-oil purchases.
Meanwhile, Prime Minister Sanae Takaichi said Japan does not currently require a reflationary policy and emphasized transparent communication with financial markets. She has also pledged to keep new debt issuance around ¥40 trillion, a move aimed at addressing concerns about Japan’s fiscal position.
The policy message matters for the Bank of Japan (BoJ) because expectations for further monetary tightening can influence the Yen. The BoJ’s policy rate is currently 1.25%, while markets continue to monitor whether inflation and rising energy costs will justify additional increases.
US Yields Keep Dollar Supported
The Dollar continues to benefit from a wide US-Japan yield differential. The US Dollar Index (DXY) remains above 102 after reaching a fresh annual high near 102.54 earlier this week. The US 10-year Treasury yield has also remained around 5.3%, reaching a 24-year high near 5.35% on Wednesday.
The Federal Reserve’s September meeting minutes added another layer of support for the Dollar. Most Fed officials indicated that another rate increase could be appropriate before year-end, reinforcing expectations for relatively tight US monetary policy.
Key market levels include:
- USD/JPY: around 158.23
- 20-day EMA: 157.54
- RSI: 55.15
- Key resistance: 159.04
USD/JPY Technical Outlook
The daily technical structure remains constructive while USD/JPY trades above its 20-day ponential moving average (EMA) at 157.54. The RSI at 55.15 is positive but remains below overbought territory, suggesting that buyers retain control without the market appearing excessively stretched.
A sustained daily close above 157.54 would preserve the near-term bullish structure and keep attention on the September 24 high at 159.04. A decisive break above that level could strengthen the case for another advance.
Conversely, a daily close below 157.54 would weaken the immediate bullish setup and increase the risk of a deeper correction. The reaction around the 20-day EMA is therefore likely to determine whether USD/JPY resumes its advance or enters a broader consolidation phase.
Conclusion
USD/JPY remains biased higher as long as the pair holds above 157.54. Strong US Treasury yields and a firm Dollar continue to outweigh Japan’s stronger current-account surplus and expectations for further BoJ normalization. A break above 159.04 would strengthen the bullish case, while a sustained move below 157.54 would signal that the current advance is losing momentum.
Sources & Methodology
Primary-source standard: Market-moving facts should link to original data releases, regulator notices, company filings or official project announcements whenever available. Secondary reporting is used for additional context, not as a substitute for original evidence.
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