FX traders should gear up for a USD/JPY drop to eventually probe the 2024 low of 139.58 posted this month, as recent price action has likely trapped bulls.

News that Shigeru Ishiba will be Japan's next prime minister, rather than Sanae Takaichi, is a huge relief for yen bulls who were close to despair before the LDP leadership run-off vote.

Ishiba is a critic of past monetary stimulus and told Reuters the Bank of Japan was "on the right policy track" with rate hikes thus far.
The Fed and BOJ rates will partially converge through to the end of 2025 and that could keep USD/JPY on a downside trajectory.

USD/JPY on Thursday and Friday broke above the 144.86 Fibo, a 23.6% retrace of the 161.96 to 139.58 (July to September) EBS drop, but is now trading well below it.
A failure to close above the 144.86 Fibo at the end of Friday's session would highlight a USD/JPY bull trap, usually a bearish sign.

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