[Dollar/Yen: From a “stabilizing market” to a “crumbling market”? What to focus on now is the change in momentum]

【USD/JPY: From a “stubborn rising market” to a “fragile market”? What to watch now is the change in momentum】

In the current foreign exchange market, there is a beginning to show a slight shift in the previously highly conscious view that “USD/JPY is hard to fall.” Looking at recent price moves, even in an uptrend the gains have become more muted, while during declines the speed of moves has increased. In other words, the market is shifting from a regime where buying dips could relatively straightforwardly lead to profits, toa situation where higher price resistance and faster downward reactions become more noticeable.

What lies behind this is the警戒 for intervention by Japanese authorities. Near 160 yen, the possibility of yen-buying intervention is strongly anticipated again, making market participants hesitant to aggressively chase higher levels. In practice, in previous market phases, during sharp yen depreciation episodes there have been rapid reversals in a short period, and patterns where the trend is shaken before it can continue have increased. In such an environment, a simple strategy like “continue buying because the uptrend is intact” becomes less effective.

On the other hand, the underlying structure that has supported USD/JPY has not collapsed. U.S. monetary policy remains tilted toward tightening, and inflation persistence is still in focus. Therefore, U.S. interest rates are likely to stay higher, and as a result the dollar remains well supported from the perspective of the U.S.-Japan interest rate differential. Also, tensions in the Middle East and movements in crude oil prices continue to function as factors supporting the dollar. In other words, while the market’s base remains tilted toward a stronger dollar, the short-term price movements on top of that base are becoming unstable.

Furthermore, the Bank of Japan’s actions are contributing to market instability. At the most recent meeting, policy rates were left unchanged, but internally there are growing voices in favor of rate hikes, and the market is searching for “when the next move will come.” However, due to considerations for the economy and external uncertainties, the BOJ finds it difficult to set a clear direction, so the market ends up with “expectations and anxieties” intertwined.

In such a situation, what individual investors should focus on is not the market’s “direction” but the way it changes. Right now, even if USD/JPY appears to be in a trend, rapid reversals are more likely in the middle of moves, and the very quality of price action is changing. For example, it will be important to respond by taking profits earlier than before, reducing position sizes, and avoiding taking positions ahead of important indicators or remarks from key figures.

In particular, during early London and early New York hours when liquidity increases, news and orders often trigger a quick change in the flow, creating both opportunities and risks. Now, it seems moving away from simply “following the trend” toward a “playbook based on fragility” is more likely to lead to stable results.

Right now, USD/JPY is in a strong market that also contains fragility. How to interpret this balance will likely be a key factor shaping future trading performance.