The Japanese yen gained ground this week after Japan’s ruling coalition lost its upper-house majority on July 20, injecting a dose of political uncertainty into markets. As investors priced in the likelihood of policy gridlock and potential delays in Bank of Japan tightening, USDJPY slipped to 148.46—although broader dollar strength continues to cap the yen’s rally.
Despite the setback, the pair remains within a bullish channel since early July, with resistance near 149.2 proving sticky. Before bulls attempt another test of the upper bound, a modest pullback to the 147.1–147.5 support zone looks likely. Should USDJPY clear 149.2, it opens the door to 150.00+, while a break below 146.5 risks a sharper correction toward 144.00.
The greenback continues to gain favor due to strong US data and rising Treasury yields, with Fed-BoJ divergence providing structural support to USDJPY. However, Japan’s unfolding political drama and potential tariff negotiations could inject volatility.
For now, USDJPY traders should prepare for continued range-bound action, with eyes firmly on US inflation prints, Japanese political headlines, and yield spreads for the next directional cue.
1. Political uncertainty boosts yen
Japan’s ruling coalition lost its upper-house majority on July 20, leading to political uncertainty and a stronger yen (148.46 per dollar), as markets anticipate policy gridlock and slower BoJ tightening.
2. Technical context & range constraints
USDJPY remains in a bullish channel from 142.7 (July 1) to resistance near 149.2, which has capped gains. A pullback to support at 147.1–147.5 is likely before any fresh leg up. A breakout above 149.2–150 could extend gains; failure to hold 146.0–146.5 risks testing 143.8–144.0.
3. US dollar & yield dynamics
The dollar index gained on robust US data, pushing USDJPY higher. Rising US Treasury yields and diverging monetary policies (Fed hawkish vs. BOJ dovish) continue to support the pair.
Summary:
USDJPY is stuck in a 147–149 range. Watch for a dip toward 147.1, followed by a potential push to 149.2–150. Breaks below 146.5 or above 149.2 will set the next directional move. Key catalysts include Japan’s tariff talks, political developments, and US economic data.
USDJPY – D1 Timeframe
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On this USDJPY daily chart:
Price is currently retesting a key confluence resistance zone (highlighted box), where:
- A descending trendline (black) meets the 200-day moving average (red line)
- Price previously broke down sharply from this zone, leaving behind a significant bearish impulse
Price has since recovered in a rising wedge formation, approaching the same resistance zone again.
This area also aligns with a prior supply zone where sellers aggressively took control, adding to its significance.
My Trading Plan:
I’ll look for bearish confirmation (such as a strong bearish engulfing or a shooting star) around this resistance zone near 149.80–150.20.
If price gets rejected from here, I’ll consider shorting, targeting the ascending trendline support around 143.80–144.50.
If price breaks above the wedge and closes above the supply zone with momentum, I’ll stay out and reassess the bullish continuation potential.
This setup relies on the idea that the wedge pattern and supply zone will act as strong resistance in a broader corrective structure.
Direction: Bearish
Target- 144.954
Invalidation- 151.405
CONCLUSION
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