Buying USDJPY on correction amid yen weakness

Despite a slightly negative opening this morning that suggested a potential pause in the uptrend, the USDJPY pair climbed above 152.50. The driving force behind this move was Sanae Takaichi's victory in the recent vote for Japan's ruling party leader, an event that caused a sharp market shift toward more accommodative monetary policy and large-scale fiscal stimulus, which put significant pressure on the yen.

Given her well-known stimulative economic views, Takaichi's win triggered a sudden tailspin in the national currency that propelled the pair above the key psychological level of 150. According to derivatives data, traders have lowered the likelihood of a near-term Bank of Japan (BOJ) rate hike to just 25%, creating a powerful impetus for the US dollar.

The greenback is also supported by the new government's fiscal stimulus and more accommodative monetary policy coming into play. Investors are now unwinding long yen positions out of fear that the central bank will face mounting pressure to maintain its ultra-loose stance in order to bolster economic growth.

While the weakening Asian currency is stoking concern among national authorities as it fuels higher import prices, USDJPY has not yet reached a level deemed critical to warrant intervention. Nevertheless, a persistent devaluation, especially one nearing the 160 threshold, could incite a response from the Ministry of Finance.

Technically, the market is seeing strong growth in the pair. This is confirmed by the steady rise of the On-Balance Volume (OBV) indicator, which signals increased buying pressure and support for the current uptrend. However, the sharp rally has pushed the Stochastic Oscillator into overbought territory (%K=81, %D=58), thereby raising the probability of a near-term correction.

Take into account the trading plan down below:

Buy USDJPY when it gets close to 150.525. Take profit: 156.000. Stop loss: 149.825.

This forecast is relevant from October 9 to October 16, 2025.