Original article by: Christopher Lewis
Source: DailyForex.com
Link: https://www.dailyforex.com/forex-technical-analysis/2025/10/usdjpy-forecast-29-october-2025/236184
Rewritten Article:
USD/JPY Forecast – 29 October 2025
The USD/JPY currency pair continues to attract significant attention as it navigates a complex mix of macroeconomic data, central bank policies, and global risk sentiment. On October 29, 2025, the pair reveals persistent strength, largely supported by diverging monetary policy paths between the Federal Reserve and the Bank of Japan. Below is an in-depth look at recent developments in the pair, key technical indicators, and future expectations for traders and investors.
Overview of Recent Market Activity
The USD/JPY rate has been on an upward trajectory for much of 2025, reflecting a persistent interest rate differential between U.S. and Japanese fixed-income markets. As of the end of October, the pair remains in a well-established bullish trend.
Several factors continue to drive the dynamics of USD/JPY:
– The U.S. Federal Reserve’s hawkish monetary stance
– Japan’s ultra-loose monetary policy
– International capital flows favoring U.S. assets
– Risk sentiment influenced by geopolitical events and global economic data
U.S. Fundamentals Supporting the Dollar
The strength of the U.S. dollar against Japan’s yen is rooted in solid macroeconomic fundamentals coming out of the United States. Key contributors include:
– A robust U.S. labor market
– Stubborn core inflationary pressures
– The likelihood of one or more rate hikes by the Federal Reserve
– Investor preference for U.S. Treasury instruments due to higher yields
The Federal Reserve has reiterated its commitment to taming inflation, signaling no immediate intention to pivot toward looser monetary policy. This contrasts dramatically with Japan’s current economic stance, where inflation remains relatively subdued, and the Bank of Japan continues to implement yield curve control.
Bank of Japan Maintains Dovish Stance
The Bank of Japan’s policy remains an anomaly in the current global landscape. While other central banks are tightening monetary policy to combat inflation, the Bank of Japan is focused on economic recovery and maintaining market stability.
Key points about the BOJ’s current policy:
– Interest rates remain negative or near-zero
– Continued asset purchases to stabilize bond yields
– Reluctance to tighten monetary policy due to weak domestic demand
– Focus on wage growth and structural reforms over immediate inflation control
This divergence forms the backbone of the bullish case for USD/JPY, with Japanese investors increasingly seeking higher returns abroad, particularly in U.S. markets.
Technical Analysis for USD/JPY
On the technical front, USD/JPY is sitting near recent highs, as bulls continue to command the market. The price action suggests minor pullbacks are likely to be viewed as buying opportunities rather than trend reversals.
Key technical highlights:
– USD/JPY is maintaining its position above key moving averages, including the 50-day and 200-day simple moving averages (SMAs), both of which are upward sloping
– The Relative Strength Index (RSI) is nearing overbought territory, which may trigger short-term consolidation or a minor correction
– Support lies around the 147.00 level, while resistance is seen near the 151.00 mark
– A break above the resistance may clear the way for a move toward the 155.00 handle in coming weeks
Price action suggests there is considerable demand for the dollar on dips, and absent any fundamental surprises, the trend is likely to continue.
Short-Term Pullback Scenarios
While momentum favors the bulls, no market moves in a straight line. Technical indicators, especially an overstretched RSI, could lead to temporary retracements. However, such pullbacks are likely to be shallow and attract buying interest.
Potential retracement areas:
– Fibonacci retracement at 149.00
Explore this further here: USD/JPY trading.