JPY_3_M

USDJPY steps back from brink.

Forex 4 minutes to read
Picture of John Hardy
John J. Hardy

Global Head of Macro Strategy

Summary:  USDJPY decided it wasn’t going to challenge the 150.00 barrier after all, as US yields have backed down. We won’t know the lay of the land until we get through this week’s important US data, some of which will not be forthcoming if we get a likely US government shutdown on Wednesday, and Japan’s LDP leadership election on Saturday.


What’s happening and what to look for
The US dollar trades mixed as traders are uncertain on what to do with a US government shutdown now far more likely after the failed meeting between Trump and congressional leaders yesterday. The USD correction to the strong side never really got any follow-on momentum, which means it won’t take much of a further sell-off in the greenback to suggest the bears are getting the upper hand again. A shutdown will see now jobs report this Friday, leaving traders at loose ends on where to focus their attention, but certainly risking increasing the impact of the employment related data in the ISM’s, today’s JOLTS report and the ADP tomorrow.

Japan saw its weakest 2-year JGB auction overnight since 2009, sending JGB yields at the short end of the yield curve in Japan to new cycle highs. Not sure this is as much of a driver for the JPY as the direction in global risk sentiment, whether US treasury yields at the long end stay tame (tame to lower equals JPY support) and especially the LDP leadership election this Saturday, where Takaichi is supposedly the candidate that would bring more fiscal stimulus and stress on the JGB market relative to Koizumi.

Australia’s RBA hit a hawkish note by expressing concerns that inflation would fail to fall back as much as expected, sending short Australian rates higher and the AUD on a fresh leg of strength. AUDNZD rose above 1.1400 for the first time in three years, and only a late 2022 spike to 1.1491 holds the pair back from the highest levels since 2013. There could be a significant further repricing there to the 1.20-1.25 area or higher if the focus on strong metals prices remains.

On the technical front, watching EURGBP closely for a follow through higher after the tight price action near the top of the range – could a break bove 0.8750 send the pair as high as 0.9000? Elsewhere EURNOK trades with the 200-day moving average as key resistance.

Chart: USDJPY

We continue to watch USDJPY as the USD pair with the most volatility potential, notwithstanding its rangebound behavior of the last many weeks. It looked like we were in danger of a significant squeeze above 150.00 on this latest spike, but just as US 10-year treasury yields stepped back from the brink (watch that 4.20% level!), so did USDJPY. Two key event risks to watch here are the US government shutdown risk, which now appears imminent and how this plays for the US dollar, while in Japan, the focus is on Japan’s ruling LDP party leadership election this Saturday, with some concern that a Takaichi win is more JPY bearish (but is this concern already in the price – after all, she seems the leading candidate). If USDJPY sticks a close well below 148.50, it looks like we have a failure of the upside squeeze scenario, although we’ll need to wait as long as Monday for full confirmation of the JPY status.

30_09_2025_USDJPY
Source: Saxo

FX Board of G10 and CNH trend evolution and strength.
Note: If unfamiliar with the FX board, please see a video tutorial for understanding and using the FX Board.

Gold and silver, with their insane trending strength readings, are telling us that the world sees all fiat as doomed to devaluation relative to hard assets (financial repression). Note that AUD and JPY are posting the strongest comeback attempts here and NZD is an outlier on the weak side.

30_09_2025_FXBoard_Main

Table: NEW FX Board Trend Scoreboard for individual pairs.

AUDNZD is an incredible outlier in the trend strength column, likely as much related to the surge in metals prices as the albeit AUD-supportive developments in the yield spread – with the AU-NZ two-year yield spread at its widest now since 2012. Elsewhere, the new GBPUSD downtrend will soon find itself in trouble if the USD continues to drop.

 

30_09_2025_FXBoard_Individuals
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