Japanese Yen Outlook: USD/JPY Eyes 158 Pivot, AUD/JPY and GBP/JPY in Focus

The US dollar strengthened after hotter-than-expected US inflation data lifted Treasury yields and revived concerns that inflationary pressures may remain sticky. That pushed USD/JPY back towards the key 158 level tied to recent suspected intervention from Japan’s Ministry of Finance (MOF), while AUD/JPY and GBP/JPY also approached important resistance zones amid renewed yen weakness.

 

View related analysis:

• How to Read the COT Report to Track Forex Market Sentiment
• VIX Breakout Flashes Warning Signal for Wall Street
• US Dollar Coiling, USD/JPY Eyes Resistance Heading into US CPI
• FX Futures Positioning: USD Index, USD/JPY, USD/CAD | COT Report
• AUD/USD Outlook: Aussie Buoyant Ahead of Trump-Xi Summit

 

 

USD/JPY Nears 158 as Yen Crosses Approach Key Resistance Levels

The US dollar was the strongest FX major through most of the US session after inflation data beat already elevated expectations. Core CPI rose 0.4% — above the 0.3% forecast and at its highest level since January 2025. While headline CPI came in at 0.6% as expected, it remains elevated relative to recent history due to higher oil prices. This lifted the annual inflation rate to 3.8%, its highest since May 2023.

Source: LSEG

 

• The US dollar made strong gains against the British pound, with GBP/USD falling 0.5% after breaking lower from a rising wedge pattern. UK Prime Minister Keir Starmer is also facing mounting political pressure, despite limited public support for his leadership.
• EUR/USD was also notably weaker and formed a three-day bearish reversal pattern below 1.18 (evening star reversal).
• AUD/USD formed a hanging man candle around 0.7250, while bullish momentum also appears to be fading and hinting at the potential for a pullback.
• USD/JPY rose to a five-day high, although it remained below last Wednesday’s suspected intervention level near 158.

 

USD/JPY Technical Analysis: US Dollar vs Japanese Yen

USD/JPY Traders Appear to Be Doing the MOF’s Work Ahead of 158

It has been four days since Japan’s Ministry of Finance (MOF) was heavily suspected of last intervening in the Japanese yen. The near-300-pip decline saw USD/JPY plunge from just below 158, although it was still not quite as aggressive as the 518-pip decline from 160 seen the previous Thursday.

What makes recent price action particularly interesting is that the market now appears to be doing the MOF’s work for them. USD/JPY sold off by around 100 pips near the end of yesterday’s Asian session — not enough to feel like outright intervention, but enough to strongly suggest traders are pre-emptively doing the MOF’s job.

Traders are clearly keeping a close eye on the Japanese yen around prior intervention levels, so the fact USD/JPY has climbed back towards 158 following the US inflation data leaves the pair at a pivotal level heading into today’s Asian session.

 

 

 

USD/JPY Tests Key Resistance Zone Near Suspected Intervention Levels

The 1-hour chart shows USD/JPY remains in a decent uptrend, although price is now trading within a strong resistance zone comprising the 158 handle, weekly R1 pivot, 50% retracement level, and prior suspected intervention high. Given we already saw a 100-pip decline around current levels, traders should remain on guard for another shakeout during today’s session.

At the same time, the market’s willingness to probe these levels suggests traders may be trying to lure the MOF back into action. That also raises the risk of a temporary move above 158 — potentially followed by another bout of sharp bearish volatility.

The weekly R1 pivot around 156.50 presents a viable downside target. But unless the MOF comes out swinging again, USD/JPY also risks drifting higher with inflationary pressures continuing to support the US dollar. The key distinction is that USD/JPY likely needs to drift higher rather than rally aggressively — because where the MOF is concerned, the speed of the move can be just as important as the absolute level itself.

Source: ICE, TradingView

 

AUD/JPY Technical Analysis: Australian Dollar vs Japanese Yen

The Australian dollar has been trending higher against the US dollar, so it makes sense that AUD/JPY has generally outperformed USD/JPY. That leaves the yen cross trading much closer to its late-April suspected intervention high, although it remains vulnerable to a pullback should the MOF step back into the market.

AUD/JPY is perhaps only one or two typical daily ranges away from its April high, although the daily RSI (2) is already overbought. And while the 1-hour chart continues to trend higher, resistance is looming nearby. I suspect bulls may have one final chance for a ‘last hurrah’ and could try to drive prices towards the weekly R1 pivot near 114.50. But despite the broader strength of the trend, resistance levels may prove too tempting and encourage profit-taking and a pullback — unless, of course, the MOF comes out swinging and sends AUD/JPY sharply lower.

Source: ICE, TradingView

 

 

 

GBP/JPY Technical Analysis: British Pound vs Japanese Yen

Price action on GBP/JPY has been choppy on the daily chart, to say the least. But we can still make sense of the noise by treating it as a range, where bearish setups could be sought around highs or nearby resistance levels on the assumption GBP/JPY may also turn lower during another bout of yen strength.

The 1-hour chart shows GBP/JPY has found support around the weekly and monthly pivot points. A near-term bounce could be due, which may allow bears to seek evidence of a swing high around 214 or near the recent swing high. The 213 area — which sits between the pivot points — presents a viable interim downside target. A break beneath that level would then bring the weekly S1 pivot near 211.50 into focus.

Source: ICE, TradingView

 

View the full economic calendar

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

How to trade with City Index

You can trade with City Index by following these four easy steps:

1. Open an account, or log in if you’re already a customer 
   
   • Open an account in the UK
   • Open an account in Australia
   • Open an account in Singapore
    
2. Search for the market you want to trade in our award-winning platform 
3. Choose your position and size, and your stop and limit levels 
4. Place the trade