Forecasting the USD/JPY Pair – November 4, 2025
Original analysis by: Christopher Lewis, DailyForex.com
The USD/JPY currency pair has experienced notable volatility recently, reflecting broader macroeconomic movements alongside changing investor sentiment. As of November 4, 2025, the pair shows signs of pullback amid a longer-term bullish trend that remains intact due to persistent interest rate differentials and robust market momentum favoring the US dollar. This in-depth analysis delves into market behavior, technical indicators, price levels, and potential trajectories for the USD/JPY pair for the short to medium term.
Overview of the Current Market Position
The USD/JPY has shown consistent gains throughout much of 2025, supported by the divergence in monetary policy between the United States Federal Reserve and the Bank of Japan. While the Federal Reserve continues to maintain higher interest rates to combat inflationary pressures, the Bank of Japan persists with its ultra-accommodative approach. This divergence is a key driver behind the strengthening of the dollar against the yen.
Key Market Highlights:
– The pair has steadily appreciated over the past several months due to the wide gap in benchmark interest rates.
– As of the start of November, the USD/JPY has pulled back slightly to retest prior support zones.
– Despite this temporary correction, the broader trend remains upward, supported by strong technical foundation and macroeconomic factors.
Recent Volatility and Pullback
After testing recent highs near the 151.00 mark, the USD/JPY has entered a correction phase, with prices slightly declining in recent sessions. While short-term consolidations are common following extended upward moves, it is important to determine whether this is a simple retracement or signals a more sustained reversal.
– The pair experienced a pullback toward the 150.00 level, a region that previously acted as a significant resistance zone.
– Technical traders are observing this level closely, as it may now serve as a support level.
– A successful retest and bounce from this mark would likely reinforce the bullish narrative.
Fundamental Drivers
The fundamental context continues to favor the US dollar over the Japanese yen. The primary elements behind this include contrasting economic strategies, persistent inflation in the US, and subdued economic growth in Japan.
Monetary Policy Divergence
– The Federal Reserve has maintained a policy tightening path aimed at anchoring inflation expectations and stabilizing price levels.
– US interest rates currently stand at multi-decade highs, with forward guidance suggesting no immediate pivot to rate cuts.
– In contrast, the Bank of Japan has kept its interest rates in ultra-low territory and continues to implement yield curve control measures.
– BoJ Governor Kazuo Ueda has shown limited flexibility in easing from long-held deflationary policy stances, citing sluggish wage growth and mild inflation as reasons for continuation.
Economic Indicators
– US economic data has surpassed expectations in recent months, displaying resilient GDP growth, strong labor markets, and persistent inflation pressures.
– Japan’s economy faces contrasting dynamics, with weakened domestic consumption, deflationary risks, and continued trade deficits.
– The core consumer price index in Japan remains below the 2% BOJ target on a sustained basis, keeping the door open for continued easing.
Geopolitical Context
– Rising yields on US Treasuries, driven by fiscal concerns and inflation hedging, further support the greenback.
– Market participants are also closely monitoring geopolitical risks, particularly in Asian territories, which typically weigh negatively on the yen due to Japan’s geographical proximity.
Technical Analysis
From a technical perspective, the USD/JPY pair remains in a strong uptrend. With the pullback experienced in early November, price is testing critical levels that may either reinforce or invalidate the existing market structure.
Key Technical Levels:
– Resistance: Immediate resistance stands at the 151.00 area, marked by recent swing highs.
– Support: Significant support is centered around the 150.00 level, previously acting as a resistance level and now potentially turning into support
Explore this further here: USD/JPY trading.