The USD/JPY pair is expected to trade in a narrow range centered on the upper 157-yen level in Tokyo foreign exchange trading on October 9. In overnight overseas trading, the pair briefly broke above the 158-yen level on speculation surrounding potential U.S. military action against Iran, but retreated after President Trump denied any attack before the midterm elections. The pair continues to lack clear direction. With both Japan and the U.S. heading into three-day weekends, traders are likely to refrain from aggressive buying and selling.

In overnight trading, USD/JPY initially rose as reports emerged that the U.S. could resume large-scale military operations against Iran before the midterm elections, sending WTI crude oil futures up more than 5% at one point. U.S. long-term yields climbed in tandem, driving dollar buying. USD/JPY extended gains to around 158.36 yen at its peak.

However, in the New York afternoon session, President Trump posted on his social media that “there will be no attack on Iran before the midterm elections.” Excessive geopolitical risk concerns receded, crude oil prices pared gains, and U.S. long-term yields turned lower. This prompted dollar selling, pushing USD/JPY back down to the upper 157-yen level.

Tsutomu Nakamura, a currency analyst at Gaitame.com Research Institute, noted that USD/JPY continued to trade in a range around the 158-yen level in the previous session, with the market lacking decisive catalysts. He attributed the difficulty in finding direction to market attention being concentrated on France’s fiscal and political issues, driving euro-centric price action.

In overnight overseas trading, U.S. weekly initial jobless claims also came in below market expectations, providing support for the dollar. The data underscored labor market resilience, putting upward pressure on U.S. long-term yields and contributing to USD/JPY’s gains.

Key Events Today and Expected Market Reaction

The main economic indicators scheduled for October 9 include Japan’s August Household Survey and the U.S. University of Michigan Consumer Sentiment Index (preliminary) for October. However, with regard to Federal Reserve monetary policy, market attention is firmly focused on the U.S. September Consumer Price Index (CPI) due next week on October 14. As a result, the market’s reaction to today’s University of Michigan Consumer Sentiment Index is expected to be limited.

Nakamura noted that the market places the greatest weight on next week’s CPI as the key factor influencing the Fed’s rate hike outlook, and today’s data release is merely a waypoint.

Furthermore, this weekend Japan enters a three-day holiday period including Sports Day, while the U.S. also has a three-day weekend for Columbus Day. With market participants on both sides heading into holidays, there is a strong tendency to avoid trades that significantly shift positions, and thin trading conditions are likely to produce directionless price action.

Forecast Ranges and Market Views

The USD/JPY forecast ranges for today from various firms generally fall between the lower 157-yen level and the mid-158-yen level. Gaitame.com Research Institute projects a range of 157.20 to 158.60 yen, while Wealth Advisor Inc. forecasts 157.40 to 158.30 yen.

Forecaster	USD/JPY Forecast Range
Gaitame.com Research Institute	157.20 – 158.60 yen
Wealth Advisor Inc.	157.40 – 158.30 yen

Note: All figures are forecasts for the Tokyo market on October 9

USD/JPY currently lacks clear direction, continuing to trade in a narrow range centered on the 158-yen level. While the pair occasionally reacts to headlines regarding the Iran situation, it has yet to form a sustained trend.

Market observers point out that France’s fiscal and political issues are drawing attention as a source of euro volatility, with investor interest shifting from USD/JPY to euro-related trading. As a result, USD/JPY has been relatively subdued among major currency pairs, with no clear directional bias emerging.

Next week’s U.S. September CPI release will be a critical indicator for gauging the Fed’s future rate hike pace. While some market participants believe the CPI results could trigger significant moves in USD/JPY, others note that position adjustment ahead of the three-day weekend starting today is likely to take priority.

Key factors that will determine USD/JPY’s future direction include U.S. inflation trends, developments in the Middle East, crude oil price movements, and European political risk emanating from France. Crude oil prices in particular are closely linked to the Iran situation, and the transmission channel through which heightened geopolitical risk feeds into USD/JPY via U.S. long-term yields warrants continued attention.