Japanese Yen Slips as BoJ Sounds Less Hawkish and Bears Brush Aside Fresh Intervention Warning

• Uncertainty over BoJ policy weighs on the JPY, allowing USD/JPY to begin the week higher.
• JPY bulls draw little encouragement from an intervention warning by Japan's Finance Minister Satsuki Katayama.
• Hopes for diplomacy over Iran weigh on the USD and could limit further gains in the pair.

At around 157.85 in the Asian session, USD/JPY is extending its recovery from Friday's post-Bank of Japan (BoJ) swing low below 157.00. The pair has started the week on a firmer footing, with a fresh intervention warning from Japan's Finance Minister Satsuki Katayama appearing to have little effect on its advance.

The joint FX statement with the US remains in place, Katayama said, adding that the government stands ready to curb excessive or disorderly Japanese Yen (JPY) weakness. Her comments have nevertheless provided no support for the JPY, as uncertainty persists over when the BoJ is likely to raise rates next. Japan's wide interest rate gap with other major economies also weighs on the lower-yielding JPY, offering some backing to USD/JPY.

Diplomatic hopes in the Middle East, by contrast, are weighing on the safe-haven US Dollar (USD). Iranian negotiators reportedly met Qatari mediators for a third day on Sunday, seeking progress towards an agreement to end the US-Israeli war on Iran. Iran also put forward a 48-hour plan to reopen the Strait of Hormuz, conditional on the US meeting its terms. US President Donald Trump, meanwhile, said talks were progressing well and that Iran wanted an agreement.

Further military action after the 3 November midterm elections remains an option, however, according to Trump. Iran’s Supreme Leader, Mojtaba Khamenei, has also instructed his senior military commanders to prepare for another confrontation with the US and Israel. Fresh Ukrainian strikes on Russian oil refineries are keeping the geopolitical risk premium in place as well. Together with expectations of a US Federal Reserve (Fed) rate rise, these developments favour USD bulls.

A resilient economy and persistent price pressures were evident in the US macroeconomic figures published last Thursday. Elevated crude oil prices are also fuelling inflation concerns, reinforcing the prospect of additional Fed tightening. Traders assign around a 75% probability to a December increase in US borrowing costs, according to the CME Group's FedWatch Tool. This points to an upward path of least resistance for both the USD and USD/JPY.

USD/JPY on the 1-hour chart

Technical Outlook Shows a Modest Bullish Bias

With a mildly bullish near-term bias, USD/JPY is testing the 23.6% Fibonacci retracement at 157.80. The pair also remains above its 100-period Simple Moving Average (SMA) at 157.75. This suggests underlying buying interest on dips as prices edge towards the upper end of the recent retracement structure.

Around 158.34, the cycle high anchor provides the next significant resistance. A decisive break above it would clear the way for the broader bullish move to extend. Immediate support on any pullback lies at the 23.6% Fibo. retracement at 157.80. Further support sits at the 38.2% level near 157.47, followed by the 50.0% retracement at 157.21.

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