USD/JPY overview: Relentless strength still dominant

USDJPY continues to command the FX market with a powerful bullish trend. The yen remains heavily pressured as Japan sits on the extreme end of global monetary policy, maintaining near-zero rates while the rest of the world stays significantly tighter. This alone has kept USDJPY elevated for most of the year.

The recent push into the upper 157s shows the same pattern we’ve seen for weeks — strong impulsive legs with shallow corrections. While this speaks to persistent demand for USDJPY, it also raises the question: is a deeper retracement due before a breakout attempt on the 52-week high?

Main driver behind USD/JPY’s strength

The core engine behind USDJPY’s climb remains policy divergence — and that gap continues to widen.

1. Bank of Japan’s ultra-dovish stance

The BoJ still refuses to shift away from accommodative policy. Despite inflation fluctuations, the central bank avoids decisive tightening, keeping Japanese yields pinned close to zero. This anchors the yen as the funding currency of global markets and makes it structurally weak.

2. Stable US yields and sticky inflation

While the Federal Reserve isn’t aggressively tightening, it’s also not cutting quickly. US yields remain elevated, and inflation remains sticky enough to prevent early dovish shifts. This keeps the dollar attractive compared to the yen.

3. Capital flows into USD assets

Global investors continue rotating capital into higher-yielding U.S. instruments. This flow naturally supports USDJPY and compounds the yen’s underperformance.

The result is a pair that remains fundamentally bullish until one side of the divergence changes — and so far, neither has.

USD/JPY price action narrative

USDJPY has been in a clean and aggressive uptrend with very limited pullbacks. Price is now sitting just under the 52-week high at 158.87, trading inside a premium zone where rallies typically slow down.

Candles continue to show momentum but also early signals of exhaustion — long wicks near the highs, smaller bodies, and stretched displacement. Beneath current price lies a natural re-pricing zone between 155.735 and 156.877, where the market may correct before setting up the next move.

This zone becomes the key battleground for continuation or reversal.

Technical outlook

Narrative of the technical structure

The higher-timeframe trend remains clearly bullish. But price is overextended, and a healthy retracement would restore balance. The 155.70–156.80 zone is the nearest and cleanest support area for discount entries.

Until that zone is retested, upside breakouts may lack sustainability.

Bullish scenario: Dip first, then breakout

The bullish path anticipates a structured correction before buyers re-enter with conviction.

Requirements:

• Retracement into 155.70–156.80
• Bullish rejection from this zone
• Formation of a higher low
• Break above recent short-term highs

Upside targets:

• 158.00
• 158.87 (52-week high)
• 159.50 if momentum persists

A strong reaction from the support zone supports continuation.

Bearish scenario: Failure at the highs, breakdown of support

If USDJPY keeps rejecting the highs and fails to find support in the imbalance zone, a deeper correction could unfold.

Requirements:

• Rejection from 158.00–158.80
• Breakdown below 155.735
• Lower high forming beneath 156.80

Downside targets:

A loss of structure below 155.70 opens the door for broader downside.

Final thoughts

USDJPY stays firmly bullish, but the rally is extended. With the 52-week high just overhead, the market may need a reset before attempting a decisive breakout. The 155.70–156.80 zone is the key technical area to monitor — a bounce there maintains the trend, while a breakdown signals deeper correction.

If the BoJ remains dovish and U.S. yields stay firm, the bias still leans bullish. But no trend climbs in a straight line. A healthy pullback may be the final ingredient before the next major move.