USD/JPY Faces Volatility After Japan Election While Bullish Structure Holds

USD/JPY pulled back after Japan’s election as the yen strengthened, despite expectations for post-election weakness, with markets reacting in a “sell the rumour, buy the fact” move and giving Prime Minister Takaichi early confidence after her victory. While her stronger mandate supports pro-growth and fiscal expansion policies, concerns about Japan’s debt levels remain and could keep volatility elevated, especially with traders watching the 160 level as a likely intervention threshold. The finance minister helped calm some fears around aggressive stimulus, but uncertainty remains. At the same time, the U.S. dollar is softening ahead of key data, including retail sales, inflation, and NFP, while Fed rate cut expectations have slightly decreased to about 15% for March, and reduced Chinese demand for U.S. Treasuries adds another layer of pressure on the dollar.

Technically, the longer-term trend remains bullish while the price holds above the multi-month trendline and the 50 and 200 SMAs, but failure to break 157.75 keeps the upside capped for now. A move above that level opens 160 and potentially 162, while a break below 156.00 support could trigger declines toward 154.50 and possibly 152.10. Overall, the pair keeps a bullish structural bias but faces high event risk, political uncertainty, and BOJ intervention risk near major highs, suggesting choppy moves rather than clean trends in the near term.

USD/JPY Daily Chart