Yen Extends Bearish Streak Amid Risk-On Sentiment and BoJ Uncertainty

Key Takeaways:

*Continued selling pressure drives the Japanese yen lower amid cautious BoJ policy signals.

*Progress in geopolitical negotiations reduces safe-haven demand, weighing further on the yen.

*Broad-based U.S. dollar strength amplifies the yen’s bearish momentum.

Market Summary:

The Japanese yen weakened further during the latest session, continuing its pronounced bearish trajectory as sustained selling pressure overwhelmed the traditional safe-haven asset. The currency’s decline is being fueled by a combination of domestic policy uncertainty and a notable improvement in global risk sentiment, which has diminished demand for defensive positions.

Domestically, investor focus remains squarely on the Bank of Japan’s forthcoming policy decision. While robust underlying fundamentals—including persistent inflation metrics and wage growth rates not witnessed in over a decade—have solidified the argument for policy normalization, Governor Kazuo Ueda’s persistently cautious communications have effectively tempered more hawkish market expectations. This divergence between strong economic data and a dovish-leaning central bank continues to undermine the yen’s appeal.

Concurrently, a discernible shift in global risk appetite is applying additional downward pressure. Perceived de-escalation in key geopolitical conflicts, notably the potential for accelerated peace negotiations between Russia and Ukraine following high-level discussions and the resumption of talks in the Middle East, has contributed to a broad-based reduction in safe-haven demand.

Compounding the yen’s weakness is the U.S. dollar’s broad-based strength. The greenback is advancing against a basket of G10 currencies, buoyed by resilient U.S. economic data and a relative hawkish stance from the Federal Reserve. This widening monetary policy divergence between the Fed and the BoJ is exacerbating the yen’s decline, pushing the currency to fresh multi-decade lows.

The yen’s trajectory remains highly sensitive to incoming developments on both the geopolitical front and from central bank guidance. Any hawkish pivot from the BoJ could offer reprieve, while a continuation of the current risk-on environment is likely to perpetuate the selling pressure.

Technical Analysis 

USDJPY, H4

The USD/JPY pair has extended its advance, decisively breaking above the significant technical resistance level at 147.90. This breakout follows the formation of a higher-low price pattern on the daily chart, reinforcing a constructive near-term technical outlook and shifting the bullish bias into a higher gear.

The pair has subsequently notched a one-week high near the 148.45 mark, with market attention now focused on the immediate resistance barrier at 148.85. A sustained break above this level would represent a meaningful breach of the recent sideways consolidation structure, potentially opening the door for a more pronounced bullish phase toward the psychologically important 150.00 handle.

Momentum indicators are providing strong confirmation of the bullish price action. The Relative Strength Index (RSI) has climbed into overbought territory, reflecting robust buying pressure, while the Moving Average Convergence Divergence (MACD) has crossed decisively above its zero line. This alignment between price and momentum signals increases the technical conviction behind the move.

Resistance level: 148.85, 149.90

Support level: 147.85, 146.95