USDJPY Trade Setup – 31st Oct

The USD/JPY cross enters the final trading day of October under mounting two-way pressure, with market sentiment finely balanced between post-Fed dollar softness and renewed Japanese policy vigilance. After the Federal Reserve’s 25bp rate cut and confirmation that quantitative tightening will cease on December 1st, the dollar has eased modestly, while Tokyo’s hotter-than-expected core CPI (2.8% y/y) and a fresh round of verbal intervention from Japan’s Finance Ministryreinforce the yen’s policy-driven bid tone. At the same time, global risk appetite has softened following a weaker China PMI print (49.0) and continued volatility across Asian equities, further underpinning safe-haven demand for the yen. These developments come as USD/JPY continues to consolidate below the critical 154.50 – 155.00 resistance zone, an area repeatedly defended by Japanese authorities and institutional sellers through October. Also, with yield differentials narrowing at the margin and speculative longs now stretched, the pair’s risk-reward profile tilts toward a corrective downside move into key supports. USDJPY Trade Setup: Pair / Asset Bias & Entries Stop / Invalidation Targets Why A+ (fundamentals, technicals, sentiment/positioning) Near-term catalysts (UK time) USD/JPY SHORT on pops 154.40 – 154.90 (scale); add on failed spike >155.00 that rejects back below 154.80 155.80 daily close (or close >156.20 after any MoF spike) 1: 153.00 2: 151.80 3: 150.70 Fundamentals: Fed cut 25bp and will halt QT from Dec 1, but Powell did not promise a Dec cut – USD upside remains capped. Tokyo core CPI 2.8% y/y keeps BoJ-hike chatter alive; fresh Japanese FinMin warning on FX volatility adds headline/intervention risk to topside. Technicals: Repeated supply 154.8 – 155.2, H4/D1 momentum divergence. Sentiment: Large DTCC NY-cut at 152.50 ($1.4bn); stops layered below 153.00 / 152.70; risk-off from weak China PMI (49.0) supports JPY on dips. Fri 31 Oct: China PMIs Mon 3 Nov: 15:00: US ISM Mfg; Wed 5 Nov: 15:00: ISM Services; Fri 7 Nov: 13:30: US NFP. Ongoing MoF jawboning risk in Asia hours. Chart by TradingView – USDJPY Trade Setup – 31st Oct Conclusion In the current environment, USD/JPY presents one of the cleanest asymmetric short opportunities heading into the new week. Fundamentally, the policy divergence narrative has narrowed, with the BoJ’s subtle shift toward normalization coinciding with a less hawkish Fed tone. Technically, the pair shows clear exhaustion below 155.00, supported by momentum divergence and repeated failures at prior highs. Sentiment / Dealer positioning reinforce our A+ (3/3 )setup. MoF headline risk caps upside while large dealer gamma exposure and option interest at 152.50 create gravitational pull toward lower levels. Short positions initiated on rallies toward the 154.40 – 154.90 zone offer attractive risk-reward, with downside targets at 153.00, 151.80, and potentially 150.70 if momentum accelerates. In short, the USD/JPY short bias remains A+ across fundamentals, technicals, and sentiment, a high-conviction setup that aligns with both near-term event risks and broader macro repricing into November’s economic data cycle. This analysis is for informational purposes only and does not constitute investment advice. Trading involves risk; manage exposure accordingly. For similar FX Trade Setups please visit our FX Trade Ideas page. Please visit our Disclaimer page. Disclaimer Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. 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