Selling USDJPY from 40-year peaks down to 161.300

USDJPY continues to consolidate near 163.03, hovering at arm’s length from the 40-year peak reached earlier this week. What’s driving the pair higher? The answer is straightforward: a persistent and wide monetary gap between the Federal Reserve (Fed) and the Bank of Japan (BoJ). However, there are growing signs of a looming correction that could take the wind out of USDJPY’s sails.

Satsuki Katayama, the head of Japan’s Ministry of Finance, has repeatedly voiced her willingness to intervene, though the scale of such measures remains unclear. So far, nothing has changed, but her rhetoric has fueled expectations of new money injections—it’s only a matter of time. Given that the pair is now dangerously close to the psychologically important 163.00–163.20 range, the risk of a sharp pullback is intensifying.

As for Japan’s economic health, it certainly does not favor the yen. Ongoing geopolitical jitters in the Middle East have taken a heavy toll on the Asian nation, which imports roughly 90% of its energy resources. Expensive crude requires more foreign currency and deteriorates the trade balance. In June, the country reported a deficit of 406.9 billion yen, driven by a 25.4% year-on-year increase in import costs. These factors keep eroding the Japanese currency’s fundamental support.

From a technical standpoint, USDJPY is now hovering around 163.028 after a powerful rally. A small candle—with open and close prices being right next to each other—following a large bullish one, speaks of nothing else but weakening buying pressure. The Chaikin Oscillator remains in positive territory but has already retreated from its previous local peak, confirming that bullish momentum is fading. Over the past few sessions, trading volume has declined even as prices have risen, indicating that market players are less active at current levels, making it harder to sustain quotes this high.

Taken together, signs of technical exhaustion after a lengthy rally and tangible intervention risks near the critical range pose a real threat of an imminent pullback. However, the pair’s medium‑term outlook remains rather bullish.

Pay attention to the following trading strategy:

Sell USDJPY from 163.030, with Take profit at 161.300 and Stop loss at 163.750.

The forecast is valid from July 23 till July 30, 2026.