Japanese Yen: Momentum builds below 155 against US Dollar - MUFG

MUFG’s Teppei Ino notes that USD/JPY has fallen below the bank’s 155 forecast floor, briefly trading under 154.50 and testing key Fibonacci retracement levels. The report highlights a confluence of Japan-specific factors supporting Yen strength, waning Dollar-buying momentum tied to Fed expectations, and warns that unless USD/JPY quickly reclaims 155, markets may begin to treat that level as the upper bound of a new range.

Third break below 155 tests new range

"The USD/JPY fell below the lower end of our forecast range of 155 on 7 September. The pair was trading below 154.50 as of early trading on 8 September. The catalyst for the sharp USD/JPY declines that have occurred intermittently recently remains unclear."

"However, the break below 155.50 on 7 September, which had marked the lows following both the intervention during the Golden Week holidays and the intervention at the end of July, appears to have triggered a further decline of around 1 yen."

"Several factors have combined to change the tone of the USD/JPY since the middle of last week. The first was a series of comments from US Treasury Secretary Scott Bessent around the G20 regarding Japan's fiscal and monetary policy. For example, at his post-G20 press conference on 1 September, Bessent said Japan should move away from its reflationary policies."

"The USD/JPY broke below the psychologically important 155 level on 7 September, when US markets were closed for the Labor Day holiday. From a technical perspective, the pair also briefly fell below the 38.2% retracement of its rise from the April 2025 low of above 139.50 to the July 2026 high of just below 164, at above 154.50. This brings the January low of below 152.50 and the 50% retracement level of above 151.50 into view."

"The pair could fall further toward these levels if the unwinding of positions built up on expectations of further yen weakness continues. At a minimum, unless the USD/JPY quickly recovers above 155, the market could shift into a new range in which 155 is viewed as the upper end. However, we think it is too early to conclude that the broader market narrative has changed or that the USD/JPY has definitively entered a new trading range."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)