Japanese Yen Technical Outlook : USD/JPY, EUR/JPY, GBP/JPY | Intervention Risks and Carry Trade Sensitivity

Japanese policymakers are increasingly caught between two competing priorities: defending domestic interest rates or defending the Yen. Sustained currency weakness risks importing inflation, while higher rates threaten an economy that has spent decades battling deflationary forces. With Japanese government bond yields pushing sharply higher and the Yen remaining under pressure, authorities are operating in largely uncharted territory with no clear historical roadmap.

Since the election of Sanae Takaichi, 10-year JGB yields have accelerated in near-parabolic fashion, rising from the 1.6–1.7% region toward 2.2%. This reflects growing pressure from bondholders demanding compensation for inflation risk, even as political leadership remains skeptical of aggressive tightening. The resulting policy tension has kept Yen weakness as a dominant theme, echoing dynamics seen during Abenomics and the 2021–2022 carry trade surge.

Intervention Has Limits

The Ministry of Finance has repeatedly intervened to slow Yen depreciation, defending levels such as 150 in 2022 and 160 in 2024. However, these actions have functioned more as temporary disruptions rather than structural trend reversals. Each intervention-driven pullback has ultimately allowed longer-term bulls to re-enter at improved levels, reinforcing the underlying trend rather than ending it.

This pattern was especially clear after the early-2024 intervention, when USD/JPY briefly pulled back before rallying again. Buyers ultimately pushed through prior highs, forcing another defensive effort near 160. While that produced short-lived weakness, the broader carry trade dynamic remained intact.

Lessons from July 2024

The July 2024 episode stands out as a warning. Coordinated Yen-buying intervention coincided with a softer US CPI print, fueling expectations of Fed rate cuts. The combination triggered a sharp decline in USD/JPY, but the impact spread far beyond FX. US equities sold off as carry trade leverage began to unwind, culminating in a volatility spike that pushed the VIX to one of its highest levels on record.

This episode highlighted two critical realities. First, significant carry exposure remains embedded in USD/JPY due to the wide rate gap. Second, intervention alone is unlikely to produce a lasting reversal without genuine rate compression, either through lower US yields or materially higher Japanese rates. Both paths carry meaningful systemic risk, which policymakers appear eager to avoid.

Current Policy Backdrop

For now, authorities appear to favor controlled Yen softening rather than disorderly adjustment. Comments suggesting coordination and concern over one-sided FX moves hint at behind-the-scenes efforts to manage volatility without triggering another forced unwind. Until those dynamics change, trend structure remains the dominant driver.

USD/JPY Technical Structure

USD/JPY remains technically constructive. Former resistance is now acting as support near 158.19, with additional support at 157.90. Below that, a broader support zone sits between 156.67 and 157.17. A more significant decision area lies between 154.45 and 155.00, where a deeper shift in structure would begin to emerge if tested and broken.

As long as these levels hold, pullbacks continue to resemble corrective pauses rather than trend reversals.

USD/JPY 4hour Chart

EUR/JPY Outlook

EUR/JPY continues to outperform, having broken to fresh all-time highs following a well-defined bull flag and falling wedge continuation pattern. Even as USD/JPY consolidates below 160, EUR/JPY strength remains intact, particularly if any USD weakness unfolds in an orderly manner.

Near-term support is being tested around 184.44, a former resistance level, with secondary support closer to 183.50. Holding these zones would keep the broader bullish structure firmly in place.

EUR/JPY 4hour Chart

GBP/JPY Outlook

GBP/JPY also maintains a favorable structure, arguably cleaner than EUR/JPY. While EUR/JPY consolidated through a channel, GBP/JPY spent weeks in a flat range before breaking higher decisively following a successful test of range support.

Key support levels now sit at the former swing high near 212.16, followed by the prior range ceiling at 211.42–211.49. A deeper support base remains at 210–210.30. A confirmed break below this lower zone on a four-hour or daily closing basis would mark a meaningful shift in structure, given the repeated historical respect shown at this level.

GBP/JPY 4hour Chart

Bottom Line

Yen crosses remain supported by carry dynamics, but intervention risk and policy sensitivity continue to cap complacency. USD/JPY remains bullish but increasingly fragile near key psychological levels, while EUR/JPY and GBP/JPY offer cleaner expressions of Yen weakness with less immediate policy pressure. Until genuine rate convergence appears, trends are likely to persist, though volatility risk remains elevated beneath the surface.