[Dollar-yen is no longer a one-way “buy on dips”; in the current market, be mindful of even weaker retracements]

【The USD/JPY is no longer a solely “buy on dip” market; current conditions also demand attention to the weakness of rebounds】

The USD/JPY pair is still holding in the high range, but recently price action has shown some differences from before. In the past, the trend of “it’s bought when it falls” was very strong and buy-the-dip tended to work well. Now, however, there are more instances where the upside is capped during pullbacks and cases where a single hint can trigger a sharp reversal, making the overall market not solely explainable by a continuing “yen weakness” trend.

Of particular note to the market is the vigilance against possible FX intervention by Japanese authorities. Near 160, there have even been episodes of rapid movement toward the yen, and market participants have a lingering sense that intervention could recur at this level. As a result, the aggressive chasing of new highs has become somewhat subdued.

On the other hand, the fundamental structure supporting USD/JPY remains intact. In the United States, vigilance toward inflation persists, and the Fed is not easily inclined to large rate cuts. In other words, expectations of higher U.S. rates tend to support the dollar, and the interest-rate differential between Japan and the U.S. continues to provide a conducive backdrop for a dollar-strength, yen-soft trend.

Additionally, Middle East developments and oil price movements significantly affect the market. When oil prices rise, energy-importing countries like Japan face stronger inflationary pressures, which can manifest as yen-selling pressure. At the same time, a global risk-off mood can prompt yen buying, so current conditions are not driven by a single factor alone.

Furthermore, attention is focusing on the Bank of Japan’s moves. The latest BOJ meeting left policy rates unchanged, but internally there are increasing voices in favor of tightening, and the market is seeking the next move. However, considering economic conditions and external uncertainties, a rapid policy shift by the BOJ is not highly likely. This mix of “expectation and caution” adds to the instability of the USD/JPY pair.

In such an environment, individual investors should focus on“not just that a trend exists and you’re safe, but where the flow could break”. Recently, even within an uptrend, big adjustments can occur abruptly, making timing for taking profits and position management more critical than before.

Currently, rather than holding large positions for long periods, shorter-term strategies that target periods with higher price movement—such as the London and early New York sessions—tend to fit better. Also, around key indicators and speeches, movements often swing both ways rather than moving in one direction, so flexibility to “only aim for the reachable parts” is necessary.

The current USD/JPY is in a strong market, yet it is also extremely nervous. Therefore, sensing changes in price movement rather than simply predicting direction will likely determine future trading performance.