USD/JPY, arguably the most volatile FX currency pair, has certainly held its reputation this year with a constant flurry of uptrends and downtrends.
The first half of the year, demarcated by widespread dollar-selling, took the pair to lows not seen since September 2024 at 139.20.
However, a Liberation Day bottom in the dollar followed by a prolonged multi-month range led to a huge, decisive rebound in the pair.
Fundamentally, the still large yield differential—between the near-zero 0.50% in Japan and the persistently above 4% for the US 10-year yield—remained a fundamental boost underpinning demand for the US Dollar against the Yen.
This phenomenon significantly accelerated after Takaichi Sanae’s appointment as Japan’s Prime Minister.
As a notable fiscal dove following the ultra-loose policies of former PM Shinzo Abe to bolster Japanese economic growth, the Yen could not resist the renewed pressure.
After the election, USD/JPY jumped 1600 pips in a breakout gap and kept on going to the recent 154.50 highs, 4.70% above the October open.
Only recently, interesting technical developments may have marked a new intermediate top.
A bearish daily divergence is helping mean-reversion selling in the current risk-off session.
Explore its impact through our mulit-timeframe analysis of the FX pair.