Fundamental Drivers
• Bank of Japan (BoJ) Policy Shift: The Bank of Japan’s August policy statement, accompanied by Governor Kazuo Ueda’s remarks, has heightened expectations for a potential rate hike. Ueda’s emphasis on wage growth and a tightening labor market has bolstered the yen, introducing downside pressure to USD/JPY as markets anticipate a possible policy normalization in the coming months (source: Bank of Japan August Policy Statement).
• Japanese Economic Data: Recent data showed Japan’s Leading Economic Index revised to 105.6, up from May’s 104.8, signaling moderate optimism for the Japanese economy (source: Ministry of Economy, Trade and Industry, Japan).
• US Federal Reserve Outlook: In his Jackson Hole speech, Federal Reserve Chair Jerome Powell hinted at a possible rate cut in September, which has weakened the US dollar as traders reassess the Fed’s policy trajectory (source: Reuters, August 2025).
Technical Analysis: Trading Levels Explained
Support Levels
• 146.50: This is a key support level, as it has previously acted as a strong demand zone where buyers stepped in to halt further declines. The market’s reaction at 146.50 is often decisive—if breached, it signals a loss of bullish conviction and opens the door for further selling. The importance of this level is reinforced by the confluence of prior price bounces and its proximity to high-volume trading zones (source: TradingView historical price data).
• 146.00: Secondary support, marking the next area of potential buyer interest.
• 145.30: Deeper support, coinciding with earlier consolidation phases.
Resistance Levels
• 148.00: This level has consistently served as a formidable resistance, capping advances during the recent rally. A sustained break above 148.00 would be significant, as it indicates renewed buying interest and the possibility of trend resumption. The 148.00 barrier has repeatedly triggered profit-taking and short-term reversals, making it a focal point for both technical and fundamental traders (source: Reuters technical analysis, August 2025).
• 148.78: Weekly high and immediate upside target if 148.00 is cleared.
• 149.50: Next resistance, representing a round-number psychological level.
Indicators
• Alligator Indicator: The indicator has turned downward, confirming the presence of bearish momentum and supporting the current corrective move (source: TradingView chart studies).
• RSI: After dipping into oversold territory, the Relative Strength Index is now recovering, suggesting a potential for a short-term bounce if buyers return (source: Reuters).
• EMA50: The 50-period Exponential Moving Average is acting as resistance, with price action struggling to break above it—further confirming the bearish bias (source: Investing.com USD/JPY technicals).
Trading Scenarios: Logic Behind Buy and Sell Zones
Bullish Setup
Buy Zone: Above 148.00
A break and close above 148.00 signals that buyers have regained control, overcoming a critical resistance that has previously capped gains. This move would likely attract momentum traders and trigger stop-loss orders from short positions, fueling a rally toward the next resistance at 148.78 and potentially extending to 149.50. The renewed buying interest is often driven by shifts in macroeconomic sentiment—such as any dovish surprises from the Federal Reserve or stronger-than-expected US economic data—which could weaken the yen and boost the dollar. Monitoring central bank communications, especially any unexpected statements from the BoJ or the Fed, is crucial, as these can act as catalysts for a breakout (sources: Bank of Japan August Policy Statement, Reuters, Investing.com).
• Entry: Above 148.00 (confirmation of breakout)
• Targets: 148.78 (weekly high), 149.50 (next resistance)
• Stop-Loss: Below 146.50 (to limit downside risk if breakout fails)
Bearish Setup
Sell Zone: Below 146.50
A decisive move below 146.50 suggests that sellers have overwhelmed buyers at a key support, opening the path for further downside toward 146.00 and then 145.30. This level is critical as it often marks the line where bulls attempt to defend the trend—if breached, it can trigger accelerated selling and attract short-term traders. Bearish setups are reinforced by hawkish signals from the Bank of Japan, such as explicit guidance on policy tightening, or dovish rhetoric from the Fed, both of which can drive yen strength and dollar weakness (sources: Bank of Japan August Policy Statement, Reuters).
• Entry: Below 146.50 (confirmation of breakdown)
• Targets: 146.00, 145.30 (progressive support levels)
• Stop-Loss: Above 147.50 (protects against false breakdowns)