CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• Fed keeps fed funds rate steady, cites resilient labor market and balanced economic risks.
• US Treasury yields and Dollar Index gain modestly due to Fed's slightly hawkish inflation stance.
• Market participants await Fed Chair Powell's press conference for further directional guidance.

The USD/JPY remained unfazed during the North American session after the US Federal Reserve (Fed) maintained the fed funds rate at the 4.25%—4.50% range while shifting slightly hawkish after acknowledging there's no inflation improvement. At the time of writing, the pair trades at around 155.31, down 0.12%.

USD/JPY drops, even though Fed's remove inflation language

The Federal Reserve's monetary policy statement highlighted a resilient labor market while maintaining that risks to its dual mandate goals "are roughly in balance." Policymakers noted solid economic expansion and reiterated their commitment to monitoring risks while continuing balance sheet reduction at the existing pace. The decision was unanimous.  

Following the announcement, U.S. Treasury yields climbed, with the 10-year note rising four and a half basis points to 4.581%. The U.S. Dollar Index (DXY) gained 0.17%, reaching a session high of 108.10.

Meanwhile, USD/JPY traders will eye Fed Chair Jerome Powell's press conference at around 18:30 GMT.

USD/JPY Reaction to Fed's Decision

The USD/JPY ticked higher towards the 100-hour Simple Moving Average (SMA) at 155.44. If surpassed, it could pave the way to test the 200-hour SMA at 155.71. Further upside is seen, as 156.00 would emerge as the next resistance. 

Conversely, if USD/JPY drops inside the Ichimoku Cloud (Kumo) below 155.20, a test of 155.00 is on the cards. On further weakness, the pair could challenge the January 25 daily low of 154.09.

• USD/JPY trades subduedly around 155.40 ahead of the Fed’s monetary policy announcement.
• The Fed is widely anticipated to leave interest rates steady in the range of 4.25%-4.50%.
• Investors have underpinned Yen against the US Dollar as BoJ's hawkish bets swell.

The USD/JPY pair edges lower to near 155.40 in Wednesday’s North American session. The asset trades cautiously even though the US Dollar (USD) performs strongly ahead of the Federal Reserve’s (Fed) monetary policy decision at 19:00 GMT.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, refreshes three-day high near 108.30. The USD Index gains as traders are confident that the Fed will announce a pause in the policy-expansionary spell and keep interest rates steady in the range of 4.25%-4.50%. In the last three policy meetings, the Fed reduced its key borrowing rates by 100 basis points (bps).

As the Fed is certain to maintain the status quo, investors will pay close attention to Fed Chair Jerome Powell’s press conference to gauge the next move in the US Dollar. Powell can be asked how long the Fed will keep interest rates at their current levels. Investors will also be keen to know the impact of United States (US) President Donald Trump’s economic agenda on the monetary policy outlook.

Analysts at Macquarie expect Powell to offer little in this regard other than emphasizing the “data dependence of future decisions” and highlighting “uncertainty about the neutral rate.”

Market participants view Trump’s policies, such as immigration controls, higher tariffs, and lower taxes, as inflationary and pro-growth for the economy. This scenario forces Fed officials to adopt a hawkish stance on interest rates.

Though the US Dollar performs strongly, investors have underpinned the Japanese Yen (JPY) against the Greenback amid growing expectations that the Bank of Japan (BoJ) will raise interest rates again this year.

BoJ hawkish bets swell after minutes of the December meeting showed that officials emphasized the need to adjust the monetary policy cautiously in hopes that Japan's spring wage negotiations will result in strong hikes again this year.

The minutes of the Bank of Japan (BOJ) December meeting are outdated following last week’s 25bps policy rate hike to 0.50%, BBH FX strategists report.

BOJ policy rate to peak around 1.00%

“In December, the BOJ left the policy rate unchanged at 0.25% and the minutes showed the board discussed how high to raise the policy rate in the future. One member cautioned the BOJ ‘would need to slow the pace of policy interest rate hikes’ once the policy interest rate approached the neutral interest rate.”

“BOJ staff estimates the nominal neutral rate to be in a range of 1.00% to 2.50%. Markets continues to imply the BOJ policy rate to peak around 1.00% over the next two years. This seems about right as the BOJ expects inflation to stabilize around its 2% target in 2026. Bottom line: the BOJ shallow policy normalization cycle is an ongoing headwind for JPY.”

• USD/JPY dives sharply to near 154.00 as the Japanese Yen performs strongly on safe-haven demand.
• The BoJ hikes interest rates by 25 bps but didn’t provide a specific interest rate hike path.
• The US Dollar declines as Trump reverses the 25% tariff proposal on Columbia and an acceleration in Fed dovish bets.

The USD/JPY pair plunges to near 154.00 in Monday’s North American session. The asset weakens as the Japanese Yen (JPY) outperforms its major peers, with investors rushing to safe-haven fleet amid a sharp sell-off in United States (US) technology stocks.

US technology stocks plunged after analysts predicted that DeepSeek’s Artificial Intelligence (AI) model of China performs on par with top chatbots like OpenAI at affordable costs. Apart from the Japanese Yen, the Swiss Franc (CHF) is also performing strongly, being a safe-haven asset.

The Yen is also trading strongly on the back of an interest rate hike decision by the Bank of Japan (BoJ). The central bank raised its borrowing rates by 25 basis points (bps) to 0.5% on Friday amid confidence that sustained wage growth would keep inflationary pressures above the desired rate of 2%. The BoJ refrained from committing a pre-defined policy-restrictive path but said that they would raise interest rates further if the economy continued to perform in line with their expectations.

On early Monday, the US Dollar (USD) also performed strongly on multiple tailwinds such as US President Donald Trump’s threat to impose 25% tariffs on Columbia for refusing to accept military flights carrying illegal immigrants from their nation and the uncertainty ahead of Federal Reserve’s (Fed) monetary policy meeting on January 28-29, but surrenders its entire gains and resumed its downside journey towards the seven-week low.

Later, Trump dialed back his proposal of placing tariffs on Columbia as the South American nation accepted his terms, which diminished the USD’s safe haven. On the monetary policy front, an acceleration in Fed dovish bets also weighed on the US Dollar.

Traders now expect the Fed to cut interest rates by 50 bps this year, but it is widely anticipated to keep interest rates steady in the range of 4.25%-4.50% on Wednesday.

USD/JPY was a touch softer, tracking UST yields lower while BoJ MPC (last Friday) hinted at continued policy normalization. Pair was last seen at 154.05, OCBC's FX analysts Frances Cheung and Christopher Wong note.

USD/JPY to trend lower for now

"Japanese economic data supports BoJ policy normalization. Wage growth pressure remains intact, alongside broadening services inflation. Tokyo core CPI, PPI, wages rose while labor market report also pointed to upward wage pressure with jobless rate easing, while trade unions are calling for another 5-6% wage increase at shunto wage negotiations for 2025."

"We still look for USD/JPY to trend lower, premised on Fed cut cycle while the BoJ has room to further pursue policy normalization. Bearish momentum intact while RSI fell. Consolidation likely with risks skewed to the downside. Support at 152.80 (200 DMA). Resistance at 156.90 (21 DMA), 158.80 (recent high)."

• USD/JPY recovers sharply to near 156.50 as Japanese Yen underperforms its major peers.
• The BoJ refrained from providing a specific policy-tightening path.
• US President Trump has pushed back fears of imposing tariffs on China.

The USD/JPY recovers Bank of Japan’s (BoJ) interest rate hike-inspired losses and rises to near 156.60 in Friday’s North American session. The Japanese Yen (JPY) has turned upside down in the aftermath of the BoJ’s monetary policy announcement.

The initial reaction from the Yen was very bullish after the BoJ raised its key borrowing rates by 25 basis points (bps) to 0.5%, as expected. However, it dived later. Only one policymaker, Toyoaki Nakamura, dissented to the decision to tighten the monetary policy further. The sell-off in the Yen came after BoJ Governor Kazuo Ueda’s press conference in which he refrained from committing a pre-defined policy-tightening path.

“We don't have any preset idea and the central bank will make a decision at each policy meeting by looking at economic and price developments as well as risks,” Ueda said.

When asked about the impact of United States (US) President Donald Trump’s tariff policies on BoJ’s monetary policy stance, Ueda said, “There's very high uncertainty on the scale of tariffs. Once there is more clarity, we will take that into our forecasts and reflect them in deciding policy."

Though investors have underpinned the US Dollar (USD) against the Yen, it is underperforming its other peers as its risk-premium has diminished significantly. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slumps to 107.45, the lowest level seen in over a month.

USD’s risk premium has been diminished as Trump has dialed back expectations of tariffs on China. In an interview with Fox News on Thursday, Trump said that he could reach a deal with China without raising tariffs.

USD/JPY recently formed a lower peak near 158.85 than the one achieved last year at 162, Societe Genrale’s FX experts note.

USD/JPY can fall down to 154.30/153.75 and below

“Daily MACD has been posting negative divergence highlighting receding upward momentum. The pair is now challenging the confluence of the 50-DMA and a multi-month ascending trend line. It will be interesting to see if the pair attempts a rebound from this MA. Failure to overcome the high achieved earlier this week near 156.75 could denote risk of a deeper pullback.”

“Next potential supports could be located at 154.30/153.75, the 50% retracement from December and 152.80.”

• USD/JPY retreats from six-day high as U.S. Initial Jobless Claims suggest labor market cooling.
• Bank of Japan meeting likely to see 25 basis point rate hike, contrasting with Fed's steady stance.
• Global markets await Trump's Davos comments, with trade policy rhetoric set to influence currencies.

The USD/JPY slides during the North American session after hitting a six-day high of 156.75, as labor market data revealed in the United States (US) came worse than expected. At the time of writing, the pair trades at 156.28, down 0.19%.

Japanese Yen appreciates ahead BoJ’s policy decision

The US Department of Labor revealed that Initial Jobless Claims for the week ended January 18 increased, to 223K, exceeding forecasts of 220K. Labor market strength and rising inflation figures had prompted the Federal Reserve from continuing to easing policy, alongside uncertainty regarding the new fiscal policy applied by the Trump administration.

Even though the Fed is expected to keep rates unchanged at the next week’s meeting, the Bank of Japan (BoJ) most likely raise rates by 25 basis points (bps), which would be the highest since 2007 at the January 23-24 meeting.  Several senior BoJ officials expressed confidence on wage growth momentum.

In the meantime, the lack of economic data in the US and Japan would keep traders eyeing the US President Donald Trump appearance at the Davos World Economic Form (WEF). His trade policy rhetoric has sent waves across global financial makers,

USD/JPY Price Forecast: Technical outlook

The USD/JPY has found stir resistance at the 157.00 figure with bulls unable to crack it since sliding below the latter on January 15. Momentum seems to favor sellers, as spot prices lie beneath the confluence of the Tenkan and Kijun-sen at the 156.64-156.48 range, which if broken, could pave the way for further downside. The next key support will be the January 22 low of 155.33, followed by January 21 swing low of 154.75.

• USD/JPY ticks lower as the US Dollar trades subduedly, with investors looking for cues about the likely full-fledged Trump tariff plan.
• Investors expect the Fed to leave interest rates unchanged on Wednesday.
• The BoJ is anticipated to announce its third interest rate hike decision.

The USD/JPY pair ticks lower to near 156.30 in Thursday’s European session. The asset faces slight pressure as the US Dollar (USD) trades subduedly as investors seek clarity over the tariff plan by United States (US) President Donald Trump. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower but holds the key support of 108.00.

Donald Trump has not yet released a full-fledged tariff plan, while investors anticipated that he will unveil the tariff hike structure for all economies right on his first day of administration. In first three days of Trump administration, he has threatened 25% tariffs on Canada and Mexico and 10% on China, which will come into effect on February 1.

Going forward, investors should brace for significant volatility in the US Dollar as the Federal Reserve (Fed) is going to announce its first monetary policy decision of the year on Wednesday. The Fed is certain to announce a pause in the policy-easing spell, according to the CME FedWatch tool. Therefore, investors will pay more attention to the Fed’s interest rate guidance and the likely impact of Trump’s economic policies on the economy and monetary policy.

But before that, investors will focus on the flash US S&P Global Purchasing Managers’ Index (PMI) data for December, which will be released on Friday.

In the Asia-Pacific side, investors await the Bank of Japan’s (BoJ) monetary policy announcement on Friday. The BoJ is expected to raise interest rates. This would be the third interest rate hike by the BoJ of the current policy-tightening cycle. BoJ hawkish bets accelerated after some officials, including Governor Kazuo Ueda, commented that rate hikes would be discussed in the January meeting. “The central bank is currently analyzing data thoroughly and will compile the findings in the quarterly outlook report, and based on that, the bank will discuss whether to raise interest rates at next week's policy meeting,” Ueda said.

Chance for US Dollar (USD) to retest 156.70 before a more sustained pullback is likely. In the longer run, USD weakness has stabilized; it is likely to consolidate between 155.30 and 157.55 for the time being, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD weakness has stabilized

24-HOUR VIEW: "Two days ago, USD dropped to 154.73 and then rebounded. Yesterday, we pointed out, 'slowing downward momentum suggests the downward pressure is easing,' and we expected USD to 'trade in a range between 155.00 and 156.00.' Instead of trading in a range, USD rebounded strongly, reaching a high of 156.70. Despite the advance, there is no significant increase in upward momentum. That said, there is a chance for USD to retest 156.70 level before a more sustained pullback is likely. The major resistance at 157.55 is unlikely to come under threat. Support is at 156.00; a breach of 155.60 would indicate that the current upward pressure has faded."

1-3 WEEKS VIEW: "We turned negative in USD a week ago. Tracking the decline, we indicated yesterday (21 Jan, spot at 155.55) that 'despite no pickup in downward momentum, there is a chance for USD to drop further to 154.40.' We did not expect USD to rebound strongly to 156.70. The breach of our ‘strong resistance’ at 156.50 indicates that the weakness in USD has stabilized. For the time being, USD is likely to consolidate in a range between 155.30 and 157.55."

• USD/JPY uptrend extends spurred by steady US 10-year Treasury yield holding at 4.58%.
• President Trump plans new tariffs on Chinese, European goods, spurring US Dollar recovery.
• Bank of Japan eyes rate hike with improving wage growth and inflation, softening Yen.

The USD/JPY rose in early trading during the North American session, bolstered by Trump’s trade rhetoric against Canada, Mexico, the EU, and China. In addition, a firm US Dollar and a steady US 10-year Treasury bond yield pushed the pair above the 156.00 figure for a 0.41% gain.

USD/JPY climbs above 156.00, shrugs off BoJ rate hike speculation

On Tuesday, Trump stated his team is discussing applying 10% tariffs on China’s goods on February 1 while vowing to apply duties on European goods are also eyed. Meanwhile, the Greenback recovered following Monday’s 1.22% fall, as Trump tempered his trade rhetoric in his inauguration speech.

In the meantime, the US Dollar Index (DXY), which tracks the buck's performance against a basket of six currencies, remains unchanged at 108.13. The US 10-year T-note is yielding 4.58%, flat.

The Japanese Yen remains slightly softer even though the Bank of Japan (BoJ) is expected to raise rates at the January 23-24 meeting. Governor Kazuo Ueda and Co. got a green light as Japanese retailers are increasing wages for the second year amid rising inflation and difficulties in hiring people.

Data-wise, the US economic docket remains absent. In Japan, the Balance of Trade in December is expected to reduce the deficit to ¥-55B from ¥-117.6B.

USD/JPY Price Analysis: Technical outlook

The USD/JPY recovered after hitting a weekly low of 154.76, shy of testing a four-month-old support trendline drawn from October’s 2024 lows of 139.56.

However, buyers stepped in and pushed the exchange rate past the 155.00 and 156.00 figures, as they target the Tenkan-sen at 156.82. A breach of the latter will expose a 157.00 figure, followed by the January 14 daily high at 158.20.

Conversely, if USD/JPY tumbles below 156.00, it would expose 155.00, followed by the January 21 swing low of 154.76.

US Dollar (USD) is likely to trade in a range between 155.00 and 156.00. In the longer run, despite no pickup in downward momentum, there is a chance for USD to drop further to 154.40, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD to drop further to 154.40

24-HOUR VIEW: “In early Asian trade yesterday, we noted that ‘downward momentum is building.’ We highlighted that USD ‘could break below 154.90, but the next major support at 154.40 is likely out of reach for now.’ We pointed out ‘resistance levels are at 155.75 and 156.25.’ Our view was not wrong, as USD/JPY rose to 156.20 and then plummeted to a low of 154.76. USD rebounded from the low before closing largely unchanged at 155.50 (-0.06%). Slowing downward momentum suggests the downward pressure is easing. Instead of weakening, today, USD is more likely to trade in a range between 155.00 and 156.00.”

1-3 WEEKS VIEW: “In our most recent narrative from last Friday (17 Jan, spot at 156.20), we indicated that USD ‘remains weak.’ We also indicated that ‘if it breaks below 154.90, the next objective will be at 154.40.’ Yesterday, USD fell below 154.90, rebounding from a low of 154.76. Despite no pickup in downward momentum, there is a chance for USD to drop further to 154.40. Overall, only a breach of 156.50 (‘strong resistance’ level previously at 156.70) would mean USD is not weakening further.”

USD/JPY consolidated after the recent decline. Markets have nearly priced in a 25bp hike (92% probability) at the upcoming MPC (Friday). USD/JPY was last seen trading at 155.70, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Worry of BoJ dovish hike

“From a markets point of view, the risk is a dovish hike as this may suggest that USDJPY’s move lower may be more constrained. We remain of the view that BoJ has room to normalize policy as economic data (inflation wage growth) continues to support. Fast Retailing (Uniqlo) announced it will raise starting pay for new salary by 10%, and 5% for other employees. Meiji Yasuda announced raising wages by average of 5% for all 47k staff starting April. Elsewhere, JP CPI, PPI were all higher, paving the way for BoJ policy normalization.”

“But there is a risk that BoJ may prefer not to commit too early to future guidance to avoid unnecessary JPY strength from derailing any progress. On USD/JPY, divergence in Fed-BoJ policies should bring about further narrowing of UST-JGB yield differentials and this should underpin the broader direction of travel for USD/JPY to the downside. But the risk to the view is a slowdown in pace of policy normalization – be it the Fed or BoJ.”

“Daily momentum is bearish but RSI shows sign of rising. Consolidation is likely. Resistance at 157.10 (21 DMA), 158.80 (recent high). support at 154.90 (50 DMA), 154.30 (23.6% fibo retracement of Sep low to Jan high) and 152.80 (200 DMA).”

USD/JPY fell, tracking the gap lower in UST yields. Focus next on BoJ MPC (Fri). We are looking for 25bp hike on Friday. USDJPY last seen at 155.46 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Daily momentum is bearish

"Economic data has been supportive. Jobless rate easing, trade unions calling for another 5-6% wage increase. Fast Retailing (Uniqlo) announced it will raise starting pay for new employees by 10% and 5% for other employees. Meiji Yasuda announced raising wages by an average of 5% for all 47k staff starting April."

"Elsewhere, JP CPI, PPI were all higher, paving the way for BoJ policy normalization. Divergence in Fed-BoJ policies should bring about further narrowing of UST-JGB yield differentials and this should underpin the broader direction of travel for USD/JPY to the downside. The risk is a dovish hike, as this may suggest that USDJPY’s move lower may be more constrained."

"Daily momentum is bearish while RSI fell. Risks skewed to the downside. Next support at 154.30 (23.6% fibo retracement of Sep low to Jan high) and 152.80 (200 DMA). Resistance at 157.15 (21 DMA), 158.80 (recent high)."

• USD/JPY stable despite volatility after Trump announces possible 25% tariffs on neighboring countries.
• US Dollar Index (DXY) gains 0.29%, reaching 108.30, amid positive market sentiment.
• Focus on upcoming Bank of Japan meeting; potential for 25 basis point rate hike expected.

The USD/JPY was virtually unchanged during the North American session on Tuesday, as traders assessed US President Donald Trump’s threats to impose 25% tariffs on Canada and Mexico as soon as February 1. The Greenback recovered as the major hit a daily high of 156.20. However, fears faded as the pair traded near 155.54, virtually unchanged.

USD/JPY consolidates near 155.50 on President Trump's proposed tariffs on Canada and Mexico

Market sentiment remains upbeat, and the US Dollar climbs, as depicted by the US Dollar Index (DXY), which tracks the basket of six currencies against the buck, rising 0.29% to 108.30.

Meanwhile, traders in the FX markets would continue to be attentive to Trump’s rhetoric, which sent ripples late Monday in the US as he signed a tranche of executive orders, including illegal immigration and naming cartels as global terrorist organizations.

In addition, USD/JPY traders are focused on the Bank of Japan's (BoJ) next monetary policy meeting. Interest rate probabilities suggest the BoJ would likely raise rates by 25 basis points to 0.50% for the first time since July last year.

Source: Prime Market Terminal

This week, the US economic schedule remains absent until Thursday, when the Initial Jobless Claims data will be released, followed by Friday’s S&P Flash PMIs. In Japan, the docket will feature Trade Balance data and foreign Investment figures ahead of the BoJ meeting.

USD/JPY Price Forecast: Technical outlook

The USD/JPY uptrend remains intact, but recently, sellers stepped in and dragged spot prices from around 158.80 to the current level. Despite this, bears failed to clear a support trendline drawn from September 2024 lows near 154.50. Nevertheless, if USD/JPY holds below 156.00, further downside is seen once 155.00 is cleared. The next support would be the 154.50, followed by the 154.00 mark.

On the other hand, if USD/JPY rises past the Senkou-span A at 156.41, a test of 157.00 is on the cards. If surpassed, a jump toward the January 15 high of 158.03 is likely.

US Dollar (USD) could break 154.90; the next major support at 154.40 is likely out of reach for now. In the longer run, USD remains weak; if it breaks below 154.90, the next objective will be at 154.40, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

USD remains weak

24-HOUR VIEW: “Last Friday, USD dropped to 154.96 and then rebounded strongly. Yesterday, when USD was at 156.20, we indicated that ‘the sharp bounce has room to extend, but overbought conditions indicate that any advance is unlikely to threaten the strong resistance at 156.70.’ USD subsequently rose to 156.58 and then pulled back, closing at 155.59 (-0.45%). It traded on a soft note in early Asian trade today, and downward momentum is building. It could break below 154.90, but the next major support at 154.40 is likely out of reach for now. Resistance levels are at 155.75 and 156.25.”

1-3 WEEKS VIEW: “In our update from last Friday (17 Jan, spot at 156.20), we indicated that USD ‘remains weak.’ We also indicated that ‘if it breaks below 154.90, the next objective will be at 154.40.’ There is no change in our view. Overall, only a breach of 156.70 (no change in ‘strong resistance’ would mean that USD weakness has stabilised.”

• USD/JPY could face pressure as Trump's inauguration nears, with potential impacts from protectionist policies.
• Speculation rises on BoJ rate hike from 0.25% to 0.50%, first since July 2024, lifting yen.
• Hawkish comments from BoJ Governor Ueda and Deputy Governor Himino suggest monetary tightening.

The Japanese Yen gained some ground compared to the US Dollar in early trading on Monday, ahead of US President Donald Trump’s inauguration. Speculations that the Bank of Japan (BoJ) will hike rates kept the USD/JPY lower, trading near 155.60, down over 0.44%.

USD/JPY dips to 155.60; markets anticipate a rate hikefrom BoJ

Interest rates in Japan remain among the lowest in the G8. According to money markets futures, the BoJ would likely increase borrowing costs from 0.25% to 0.50% on Friday, the first since July 2024.

Last week, BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino delivered hawkish remarks, laying the ground for the January 23-24 meeting. The December meeting minutes showed that board members favored a rate increase.

Source: Prime Market Terminal

Therefore, further USD/JPY downside is seen as the interest rate differential between the US and Japan will diminish. However, US President Donald Trump’s taking office could keep traders on their toes due to his protectionist policies, which could be inflation-prone and prevent additional easing to the Federal Reserve.

US financial markets will remain closed on Monday due to Inauguration Day, alongside Martin Luther King Day. Therefore, liquidity conditions will likely remain thin as markets resume their activities on Tuesday.

USD/JPY Price Forecast: Technical outlook

The pair remains bullishly biased, though it has fallen below the Tenkan-sen and the 20-day Simple Moving Average (SMA), opening the door for a retracement to the Kijun-sen at 155.65. A breach of the latter will expose the 50-day SMA at 154.88, followed by a support trendline drawn from the September 2024 lows.

On the other hand, if USD/JPY climbs past 156.00, further upside is seen, with buyers eyeing the Tenkan-Sen at 156.92, followed by the 20-day SMA at 157.24.

Sharp bounce in US Dollar (USD) has room to extend; overbought conditions indicate that any advance is unlikely to threaten 156.70. In the longer run, USD remains weak; if it breaks below 154.90, the next objective will be at 154.40, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD remains weak

24-HOUR VIEW: "After USD fell sharply last Thursday, we highlighted on Friday that 'while the sharp drop appears to be excessive, the weakness has not stabilized just yet.' However, we held the view that “any further decline is likely part of a lower range of 154.90/156.15.” USD subsequently dipped to 154.96 before rebounding strongly, reaching a high of 156.37 in NY trade. The sharp bounce has room to extend, but given the overbought conditions, any advance is unlikely to threaten the strong resistance level at 156.70. On the downside, support levels are at 155.90 and 155.40."

1-3 WEEKS VIEW: "Last Friday (17 Jan), when USD was at 155.35, we indicated that USD 'remains weak.' We added, 'if it breaks below 154.90, the next objective will be at 154.40.' USD then dipped to 154.96 before rebounding strongly. Although downward momentum has eased somewhat with the rebound, only a breach of 157.60 (no change in ‘strong resistance’ from last Friday) would indicate that the weakness in USD that started last Thursday has stabilized. To look at it another way, there is still a chance for USD to break below 154.90."

• USD/JPY rebounded 0.6% on Friday as the Greenback stiffens.
• The pair gave a tidy technical bounce from a key moving average.
• Markets are broadly pivoting back into Fed rate cut hopes.

USD/JPY rallied on Friday, gaining six-tenths of one percent and snapping a two-day losing streak as the Greenback finds broad-market support and bolsters the Dollar-Yen pairing from a fresh tap of the 50-day Exponential Moving Average (EMA).

The US Dollar broadly gained ground on Friday as the Greenback gets bolstered by declining US Treasury yields in the face of renewed bets of Federal Reserve (Fed) rate cuts in 2025. Key segments of US inflation figures eased slightly throughout the week, reinvigorating hopes that price growth pressure will ease enough to push the Fed toward delivering rate cuts earlier in the first half of the year than previously expected.

The Bank of Japan’s (BoJ) next rate call is due early next Friday, where the normally-hyperdovish Japanese central bank is expected to raise interest rates by another 25 bps. US Purchasing Managers Index (PMI) activity survey results are also expected next Friday, but the runup to the key events are a notably sedate data docket on the cards, leaving investors to focus on jawboning from policymakers.

USD/JPY price forecast

USD/JPY gave a tidy technical bounce from the 50-day EMA on Friday, bouncing from 155.00 and setting up Greenback bulls for a fresh run up the charts after snapping a two-day backslide. The immediate ceiling is still priced in near the 159.00 handle.

Even if the pair rotates into a fresh bullish stance, there is still plenty of room to run before the Dollar-Yen pair runs into record highs set in 2024 near 162.00. There is a hard limit on how high Dollar bulls can run the pair before the BoJ begins getting nervous again and hovering one hand over the intervention button.

USD/JPY daily chart