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Published: 8 July 2026,08:41
Daily Market Analysis New
*The Japanese yen remains under pressure, with USD/JPY trading near 162, close to its weakest level since 1986.
*Wide US-Japan interest-rate differentials and persistent carry trades continue to drive structural yen weakness despite heightened geopolitical risks.
*Bank of Japan policymaker Toichiro Asada signaled a cautious approach to further rate hikes, limiting expectations for faster policy normalization.
The Japanese yen remains one of the weakest major currencies despite heightened geopolitical uncertainty, with USD/JPY continuing to trade near 162, close to its weakest level since 1986. Under normal market conditions, geopolitical risks would typically increase demand for the yen as a traditional safe-haven currency. However, persistent structural weaknesses continue to outweigh these defensive flows. The wide interest-rate differential between the United States and Japan remains the primary driver, encouraging investors to maintain yen-funded carry trades while favouring higher-yielding US assets.
Recent comments from Bank of Japan board member Toichiro Asada reinforced the cautious policy outlook after he stated that he would require clearer evidence of demand-driven inflation before supporting additional interest-rate hikes. This has tempered expectations for aggressive policy normalization by the BOJ and limited support for the yen. Although Japan continues to post record current account surpluses and the BOJ has gradually tightened monetary policy, these positive factors have failed to reverse the currency’s long-term weakness. Much of Japan’s overseas investment income remains abroad instead of being converted into yen, while domestic investors continue allocating capital to foreign assets through programmes such as the expanded Nippon Individual Savings Account (NISA), sustaining structural capital outflows.
At the same time, intervention risks continue to rise as USD/JPY approaches the 162–163 region. Japanese Finance Minister Satsuki Katayama has repeatedly warned that authorities remain prepared to intervene against excessive currency volatility and are maintaining close communication with US officials. Reuters also reported that Japanese authorities have adopted less predictable intervention tactics to discourage speculative positioning. Several financial institutions, including National Bank of Canada and Scotiabank, believe speculative short-yen positioning has become increasingly crowded, meaning any intervention, softer US economic data, declining Treasury yields or a more hawkish BOJ could trigger a sharp short-covering rally. Nevertheless, unless US yields decline significantly or the BOJ adopts a much more aggressive tightening stance, the broader medium-term trend continues to favour a relatively stronger US dollar against the yen.
Technical Analysis
USDJPY, H4:
USD/JPY remains in a constructive uptrend with the pair continuing to trade above its former consolidation zone after successfully defending the 161.85 support area. Following last week’s sharp pullback, buyers quickly regained control, driving the pair back toward the recent highs. Price is now approaching the key resistance at 162.70, suggesting bullish momentum remains intact as long as the pair holds above the breakout zone.
Momentum indicators continue to favor the upside. The Relative Strength Index (RSI) has rebounded to around 60, remaining above its moving average and indicating strengthening buying momentum without entering overbought territory. Meanwhile, the MACD has completed a bullish crossover above the zero line, with the histogram expanding into positive territory. This reflects improving upside momentum and suggests the recent recovery could extend further if buying pressure persists.
Overall, the near-term outlook remains bullish as USD/JPY continues to post higher highs and higher lows while momentum indicators strengthen.
Resistance Levels: 162.70, 163.50
Support Levels: 160.85, 159.90
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