Japanese Yen holds firm against weak USD following hawkish BoJ Minutes

• Hawkish BoJ minutes lend support to the JPY, leaving USD/JPY lower for a second consecutive day.
• Lower US bond yields and receding inflation concerns put pressure on both the USD and the pair.
• Ahead of Friday's US NFP release, expectations of a Fed rate rise could cushion the USD and underpin USD/JPY.

A combination of negative factors leaves USD/JPY facing renewed selling on Thursday, its second consecutive day under pressure. The pair is struggling to extend the previous day's solid recovery from the weekly low around 157.40. Before positioning for additional declines, bearish traders are waiting for a sustained move below 158.00.

Policymakers agreed that further increases in the policy interest rate and adjustments to the degree of monetary easing remained appropriate, according to minutes of the Bank of Japan's (BoJ) September meeting released earlier today. The minutes reinforce expectations of a December interest rate rise, giving the Japanese Yen (JPY) a modest boost. Alongside continued selling of the US Dollar (USD), that support for the yen is weighing on USD/JPY.

Democrats won control of both chambers of Congress in the US midterm elections, fuelling concerns over fiscal gridlock and constraints on government spending. Their leaders also pledged to seek an end to the Iran war, leading traders to remove the geopolitical risk premium from prices. Crude oil consequently fell sharply overnight, alleviating inflation concerns. US bond yields then declined further, leaving the USD under pressure.

Nevertheless, expectations of a hawkish US Federal Reserve (Fed) could provide a degree of support for the dollar and USD/JPY. The CME Group's FedWatch Tool puts the market-implied probability of another increase in US borrowing costs in December at over 80%. Wednesday's stronger-than-expected US ADP report reinforced those expectations, showing an increase of 86,000 in private-sector employment in October 2026.

Friday's closely watched US Nonfarm Payrolls (NFP) report therefore remains the main focus, with the release set to play an important part in shaping demand for the USD. Ahead of that key data risk, speculation that Japanese authorities will intervene to support their currency means any USD/JPY recovery attempt is more likely to attract selling. Waiting for a breakout from the short-term trading range would therefore be prudent before taking fresh directional positions.

USD/JPY price action on the daily chart

Technical Outlook Remains Mildly Bearish

Repeated recent failures to extend gains above the 200-day Simple Moving Average (SMA) at 158.65 leave USD/JPY with a mildly bearish near-term outlook. With the pair consolidating beneath that barrier, upward momentum appears constrained for now and rallies remain vulnerable.

To alleviate the prevailing downside bias and pave the way for a more lasting recovery, the pair would need to close above that level on a daily basis. Initial support on the downside could come from the overnight swing low around $157.40, followed by 157.00 and the trading range's lower boundary near 156.65. A breach of the latter would be viewed as a fresh bearish trigger, creating scope for a meaningful decline.

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