The US Dollar is experiencing a modest recovery from recent lows against the Japanese Yen but remains below the 151.40 level, maintaining a bearish trend. Tensions between the US and China are limiting the Dollar’s recovery against safe-haven currencies like the Yen.

The Japanese Yen is not capitalising on the Dollar’s weakness. Political uncertainty in Japan, stemming from the Komeito party’s exit from the ruling coalition, diminishes the chances of Sanae Takaichi becoming Prime Minister soon.

Technical Outlook For USD JPY

Technically, the USD/JPY pair shows a weak Dollar rebound. The Relative Strength Index on the 4-hour chart remains under the critical 50 level, hindering upward movement past the 151.40 mark.

Inability to break past 151.40 may prompt a retest of 150.50. Below this, support is at 150.00 and 149.70 levels, while a move above 151.40 could lead to resistance at the 151.90 area and possibly the 152.60 mark.

A heat map displays the US Dollar’s performance against major currencies today, with the Dollar performing strongest against the Yen. The table shows percentage changes, indicating relative currency strengths and weaknesses.

We are seeing the US Dollar struggle to push past the 151.40 level against the Japanese Yen, keeping the pair in a short-term downward trend. Flaring tensions between the US and China over new trade tariffs are making traders cautious, reducing the dollar’s appeal. Recent data confirms this hesitation, as reports show bilateral trade forecasts for the final quarter of 2025 have been revised down by 5%.

Political Challenges In Japan

The Japanese Yen cannot seem to capitalize on this, however, because of political chaos at home. The instability within the ruling coalition is creating uncertainty about the future of the Bank of Japan’s monetary policy. Historically, we have seen similar periods of political turmoil in Japan during the late 2000s, which often resulted in policy paralysis and a weaker Yen.

Underlying this, US inflation data from September 2025 showed core inflation remains sticky at 3.1%, making it unlikely the Federal Reserve will consider cutting interest rates soon. This fundamental strength provides a floor for the dollar, creating a conflict between weak short-term sentiment and strong long-term support. This divergence suggests the USD/JPY pair could be trapped in a range for the coming weeks.

For derivative traders, this environment of high uncertainty and conflicting drivers is pushing up option prices. Implied volatility on USD/JPY options has risen by over 15% in the last month, making strategies like long straddles or strangles attractive. These positions can profit from a significant price swing in either direction, which seems likely once either the political or economic pressure gives way.

Those of us with a bearish view on the pair should watch the 150.50 support level closely. A break below this could signal a move towards the significant 150.00 psychological level. Buying put options with a strike price below 150.00 could be a prudent way to position for a potential breakdown.

Conversely, a more bullish stance requires patience until we see a decisive break and hold above the 151.40 resistance. Should this occur, it would invalidate the near-term bearish outlook and open the door to a rapid move towards the highs we saw on October 14. In this scenario, call options with a strike around 152.00 would offer a way to capitalize on the renewed upward momentum.

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