Japanese Yen rebounds from three-week low as broad USD weakness and intervention risks offer support

• A combination of headwinds leaves USD/JPY edging down in Wednesday’s Asian session.
• Renewed USD selling and JPY short-covering on intervention concerns put pressure on the pair.
• Lower US bond yields and hopes of diplomacy with Iran undermine the USD before US election results.

Trading just below the mid-158.00s, USD/JPY is around 0.20% lower on the day during Wednesday’s Asian session. A combination of pressures has brought sellers back into the market, ending a two-day advance that took the pair to a near three-week high on Tuesday. Traders are also preparing for potential volatility as US midterm election results emerge.

The prospect of renewed intervention by Japanese authorities to support the Japanese Yen (JPY) is keeping traders on alert. Together with US Dollar (USD) weakness, this is weighing on USD/JPY. On Monday, Japan’s Finance Minister Satsuki Katayama said the joint FX statement with the US remains in place and that the government stands ready to counter excessive or disorderly JPY weakness.

Hopes that diplomacy could bring an end to the US-Iran war are also eroding demand for the safe-haven Greenback, adding to selling pressure on USD/JPY. President Donald Trump told the Financial Times on Tuesday that the US has no immediate plans to strike Iran and that it seems to be getting everything it wants. His remarks encouraged traders to price out the geopolitical risk premium, putting further pressure on the USD.

US government bond yields are also retreating as investors follow early midterm election results, with Republicans facing the prospect of losing their majority in the House of Representatives and possibly the Senate. This leaves USD buyers on the defensive. However, increasingly hawkish expectations for the US Federal Reserve (Fed), reinforced by Tuesday’s strong US labour market figures, could contain further declines.

September job openings increased to 7.5 million from 7.2 million, exceeding expectations, while hiring remained relatively stable, according to the Labor Department’s monthly Job Openings and Labor Turnover Survey (JOLTS). Inflation risks stemming from energy prices also strengthen the argument for further Fed tightening. These factors suggest caution before positioning for additional weakness in the USD and USD/JPY.

Meanwhile, the persistently wide US-Japan interest rate gap could restrain gains in the lower-yielding JPY. Strong follow-through selling would therefore be needed before concluding that the pair has reached a near-term peak. For fresh short-term direction, traders will turn to the US ADP private-sector employment report and ISM Services PMI, due later in the North American session.

USD/JPY daily price chart

Technical Outlook Remains Mildly Bearish

A mildly bearish near-term bias persists while USD/JPY trades beneath both the 100-day Simple Moving Average (SMA) at 159.15 and the 61.8% Fibonacci retracement at 159.75. With the pair hovering just below the 50.0% retracement at 158.45, that level represents a key overhead hurdle. A sustained recovery towards the upper Fibonacci band would require it to be regained.

Should selling resume, the 38.2% retracement at 157.16 provides the first support. Further down, Fibonacci support at 155.56 precedes the structural cycle low near 152.97, where stronger buying interest could emerge.

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