Key Points
- USD/JPY drops to 152.877, down 0.99%, after Takaichi’s election win boosted yen demand
- Dollar pressured by weak US data and cautious bets ahead of key NFP report
The Japanese yen extended its rally on Wednesday, with USD/JPY falling nearly 1% to 152.877, following a similar-sized drop the session prior.
This swift move reflects a broader shift in sentiment as investors respond to Prime Minister Sanae Takaichi’s landslide victory, which has reshaped expectations around Japan’s fiscal and economic strategy.
The result hands Takaichi’s government a strong mandate, enabling greater control over fiscal planning and dampening the need for politically motivated stimulus packages.
Japanese government bonds (JGBs) and the yen have both rallied on the back of reduced fiscal risk and a market-friendly outlook.
Dollar Weakens Ahead of Key Data
The greenback remains under broad pressure as weaker-than-expected US data has raised doubts about the strength of the economic recovery.
Retail sales and labour cost growth both slowed in the fourth quarter, setting a cautious tone ahead of the January nonfarm payrolls report, where markets expect a modest +70,000 job gain and a steady 4.4% unemployment rate.
The Federal Reserve is now expected to deliver around 60bps of cuts by December, with the first move potentially coming mid-year.
Commentary from officials remains mixed, but traders are increasingly positioning for easing as inflation slows and productivity improves.
Technical Analysis
USDJPY has sharply retreated to 152.877, posting a notable daily loss of -1.526 (-0.99%). After topping out at 159.452 in late January, the pair has entered a clear downward correction, now trading below its short-term moving averages.
The breakdown below the MA5 (155.479), MA10 (155.358), MA20 (155.944), and MA30 (156.426) signals the erosion of bullish momentum.
The rejection from the 159.45 high coincided with heavy selling pressure, evidenced by increased volume during the red candles that followed. This correction has now erased nearly half of the previous uptrend that began in late September from 145.484.
Despite a minor bounce attempt around 154–155, selling pressure has resumed, dragging the pair back toward prior support levels.
If current support near 152.80 fails to hold, the next key levels to watch are 151.50, followed by a possible revisit of 150.00. On the upside, resistance now lies firmly around 155.00, which also aligns with the cluster of moving averages.
With MACD likely to turn bearish and volume shifting toward sellers, USDJPY may continue to drift lower unless strong intervention or a fundamental catalyst emerges.
Traders will be closely watching for signs of bottoming or further breakdown in the coming sessions.
Market Implications
With the yen on the offensive and the dollar reeling from weaker data, traders are increasingly cautious ahead of the US jobs report.
If payrolls undershoot expectations, the move away from the dollar could accelerate, especially against low-yielders like the yen and franc.
USD/JPY may continue to trend lower, with price action suggesting a potential test below 152 if risk sentiment deteriorates or bond yields decline.
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