The ATR indicator is sitting near its lowest readings and is trending downward. This may reflect not only reduced trading activity over the Thanksgiving period in the US, but also uncertainty among currency traders who are weighing the many factors influencing USD/JPY at the moment.

On one hand, the US dollar is being pressured by expectations of a Federal Reserve rate cut, with Fed officials delivering notably dovish comments this week.

On the other hand, the yen’s valuation is being shaped by:
→ the economic stimulus package from Prime Minister Sanae Takaichi;
→ expectations of Bank of Japan intervention to support the weakening yen;
→ geopolitical tensions between China and Japan.

Technical Analysis of USD/JPY

The chart supports the view that the market is balanced.

Using the ascending channel that began forming after USD/JPY broke above the psychological 150 level, we can see that the pair has moved into the lower half of the channel, while the median line has shifted from acting as support to working as resistance (as shown by the arrows).

At present, USD/JPY is compressing into a triangle formed by:
→ the lower boundary — the line dividing the lower half of the channel into quarters;
→ the upper boundary — the descending trendline drawn through last week’s lower highs.

A breakout from this triangle may be sudden and tricky, so the current fall in volatility should not lull USD/JPY traders into complacency. It is entirely possible that after repeated verbal warnings, the Bank of Japan could proceed with direct intervention — an action that would almost certainly break the existing upward channel.

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