27 October 2025,03:38
Daily Market Analysis New
27 October 2025, 03:38
Key Takeaways:
*Yen weakened as Sanae Takaichi’s election as Prime Minister reignited expectations of fiscal expansion and prolonged ultra-loose monetary policy.
*Markets fear renewed stimulus and BoJ’s limited room to tighten policy could deepen the gap between Japan and other major central banks.
*Japan’s CPI release and this week’s back-to-back Fed and BoJ decisions will be crucial in determining whether USD/JPY breaches new yearly highs..
Market Summary:
The Japanese Yen commenced the week on a softer footing, depreciating notably against its major peers and propelling the USD/JPY pair toward the 153.00 mark. The currency’s weakness stems from a confluence of domestic political shifts and the persistent monetary policy divergence between Japan and its developed market counterparts.
The primary catalyst for the sell-off was the election of Sanae Takaichi as Japan’s new Prime Minister, a move that has reignited market concerns over a return to fiscal loosening. As a perceived disciple of the late Shinzo Abe, her leadership fuels expectations for expansive government spending and sustained ultra-loose monetary settings. This perception threatens to exacerbate Japan’s substantial public debt and casts doubt on the Bank of Japan’s (BoJ) ability to systematically tighten policy and normalize interest rates, thereby undermining the Yen’s appeal.
While the Yen remains under pressure, its trajectory is expected to navigate a bumpy path this week, dictated by a series of high-stakes economic events. The immediate focus is Japan’s Consumer Price Index (CPI) release tomorrow, which will inform the BoJ’s policy outlook. The currency’s fate, however, will be predominantly influenced by the back-to-back central bank decisions from the Federal Reserve on Wednesday and the Bank of Japan on Thursday. A hawkish hold from the Fed, contrasting with a persistently cautious stance from the BoJ, would widen the policy divergence that has been a key driver of Yen weakness, potentially pushing the currency to fresh lows for the year.
Technical Analysis
The EURJPY pair has executed a decisive technical breakout, surging past its immediate resistance at the 177.80 mark to notch a fresh all-time high. This move solidifies the bullish bias and confirms a resumption of the pair’s powerful underlying uptrend. The price action demonstrates robust underlying strength, characterized by a sharp rebound from a technical retracement that found firm support near the 175.00 level before gathering sufficient traction to challenge and breach previous records.
The bullish structure is being fueled by strong and accelerating momentum. The Relative Strength Index (RSI) has pushed into overbought territory, reflecting intense and sustained buying pressure. Concurrently, the Moving Average Convergence Divergence (MACD) has rebounded decisively above its zero line and continues to trend higher. This indicator alignment confirms that bullish momentum is not merely present but is actively gaining strength.
With the pair trading in uncharted territory following a confirmed breakout and supported by powerful momentum signals, the path of least resistance remains firmly to the upside. While the overbought RSI condition warrants monitoring for short-term exhaustion, it often persists during strong trending moves.
Resistance level: 180.20, 182.50
Support level: 175.40, 173.45
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