CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

• 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

USD/JPY continued to trade lower, as expectations on BoJ hike next week continues to build. Markets are pricing in 22bp hike at the upcoming MPC (vs. 11bp hike expectations at the start of the new year). Pair was last at 155.69 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Risks remain skewed to the downside

"The shift this week in particular was due to comments from BoJ officials and a report in Japanese media, that said BoJ officials see good chance of an interest rate hike next week as long as Trump administration does not trigger too many negative surprises. Earlier this week, Governor Ueda spoke about making decision whether to raise rate at the upcoming BoJ meeting. He also shared there is positive views on wage hikes gathering momentum."

"Deputy Governor Himino also said MPC will discuss next week whether to raise rate or not and to raise rate if economic outlook is realized. All seem to point to high likelihood of a hike at the upcoming MPC (24 Jan). We continue to look for a hike as data continues to support policy normalization. Wage growth pressure remains intact, alongside broadening services inflation."

"Daily momentum is bearish while RSI fell. Risks remain skewed to the downside. Next support at 154.80 (50 DMA), 154.30 (23.6% fibo retracement of Sep low to Jan high) and 152.80 (200 DMA). Resistance at 156.40, 157.40 (21 DMA). Tactically, in our FX Weekly sent on Wed, we look for short SGDJPY targeting a move lower towards 110. Spot ref then at 115.10 with SL at 117.12. Cross was last at 113.70 levels."

Weakness has not stabilized, but any further US Dollar (USD) decline is likely part of a lower range of 154.90/156.15. 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: "We expected USD to 'trade with a downward bias yesterday,' but we were of the view that 'any decline is likely part of a lower trading range of 155.80/157.00.' Our view was incorrect, as USD plunged, reaching a low of 155.09. While the sharp drop appears to be excessive, the weakness has not stabilized just yet. However, any further decline is likely part of a lower range of 154.90/156.15. In other words, a sustained break below 154.90 is unlikely."

1-3 WEEKS VIEW: "We revised our USD view to negative yesterday (16 Jan, spot at 156.35), highlighting that 'the rapid increase in momentum indicates further USD weakness, with a technical target at 154.90.' We did not expect USD to approach 154.90 so quickly, as it plummeted for the second day in a row, reaching a low of 155.09. Our view bearish view remains unchanged, and if USD breaks below 154.90, the next objective will be at 154.40. On the upside, should USD rise above 156.70 (‘strong resistance’ level was at 157.60 yesterday), it would mean that USD is not declining further."

• USD/JPY rebounds from 156.00 as the upside move in the Japanese Yen pause after a two-day runup.
• US Trump is expected to announce policies on tariffs and taxes sooner.
• The BoJ is confirmed to discuss raising interest rates in the policy meeting next week.

The USD/JPY pair discovers buying interest after posting a fresh four-week low of 156.00 in Friday’s European session. The asset rebounds as the US Dollar (USD) gains ground, with investors turning cautious ahead of United States (US) President-elect Donald Trump’s inauguration on Monday.

Investors expect that Trump will announce tariff and taxation policies right after returning to the White House. Market experts believe that these policies will be pro-growth and inflationary for the US economy, a scenario that will allow the Federal Reserve (Fed) to keep interest rates at their current levels.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, wobbles above the key support of 109.00.

This week, the US Dollar remains broadly under pressure as traders raised Federal Reserve (Fed) dovish bets after the release of the US Consumer Price Index (CPI) data for December, which showed that the annual core inflation surprisingly decelerated to 3.2% from the former reading of 3.3%, which is the lowest reading in over three years.

On the Tokyo front, the Japanese Yen (JPY) performs weakly on Friday after a strong two-day upside move even though Nikkei has reported that a majority of Bank of Japan (BoJ) officials are expected to raise interest rates at the policy meeting on January 23-24. This week, BoJ Governor Kazuo Ueda confirmed that the central bank will discuss raising interest rates in the policy meeting next week. Ueda said that 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.”

• USD/JPY recoups some intraday losses as the US Dollar gains ground with focus on Donald Trump’s inauguration.
• Traders have raised Fed dovish bets after soft US core CPI data for December.
• BoJ Ueda keeps the option of further rate hikes in January’s policy meeting on the table.

The USD/JPY pair bounces back from the intraday low of 155.20 and rises to near 156.00 but is still down around 0.25% in Thursday’s North American session. The asset recovers as the US Dollar (USD) gains ground after Wednesday’s sell-off that was driven by surprisingly lower core Consumer Price Index (CPI) reading for December.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to near 109.25.

The CPI report showed on Wednesday that the core inflation – which excludes volatile food and energy prices – grew at a slower pace of 3.2% from the estimates and the prior release of 3.3%. Soft core reading led to an uptick in Federal Reserve (Fed) dovish bets. As a result, traders are now pricing in two interest rate cuts from the Fed this year, with the first coming in September, according to the CME FedWatch tool.

Meanwhile, the next major trigger for the US Dollar is the President-elect Donald Trump’s inauguration ceremony on Monday. Market participants expect Trump will release updated tariff plan sooner that would lead to a global trade war. The impact will be favorable for growth and inflationary pressures in the United States (US).

In the Asia Pacific front, growing expectations of more interest rate hikes from the Bank of Japan (BoJ) keeps the Japanese Yen (JPY) on the frontfoot. Traders price in two interest rate hikes this year, Reuters reported. Market speculation for the BoJ to raise interest rates were stemmed from Governor Kazuo Ueda’s commentary on Wednesday in which he said that the central bank is currently “analysing data thoroughly” and will compile the findings in the quarterly outlook report, and on based on that the bank will discuss whether to “raise interest rates at next week's policy meeting”.

US Dollar (USD) is likely to trade with a downward bias; any decline is viewed as part of a lower range of 155.80/157.00. In the longer run, rapid increase in momentum indicates further USD weakness, with a technical target at 154.90, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.  

Rapid increase in momentum indicates further USD weakness

24-HOUR VIEW: “The sharp drop in USD that sent it plunging to 155.93 was surprising (we were expecting range trading). The sharp and swift selloff seems to be excessive. However, the weakness does not appear to have stabilized just yet, and it is premature to expect a stabilization. Overall, USD is more likely to trade with a downward bias today. However, any weakness is viewed as part of a lower range of 155.80/157.00. To look at it another way, a sustained decline below 155.80 is unlikely today.”

1-3 WEEKS VIEW: “We indicated two days ago that (14 Jan, spot at 157.50) that ‘the current price movements are likely part of a consolidation phase, expected to be between 156.50 and 158.50.’ Yesterday, USD decisively broke below 156.50, reaching a low of 155.93. The rapid increase in momentum indicates further USD weakness. The technical target is near 154.90. To sustain the rapid buildup in momentum, USD must remain below the ‘strong resistance’ level, currently at 157.60.”

USD/JPY fell in reaction to a volley of comments from BoJ officials, that seem to point to high likelihood of a hike at the upcoming MPC (24 Jan). Pair was last seen at 155.82 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.

Wage growth pressure remains intact

“Most notable one was a report that said BoJ officials see good chance of an interest rate hike next week as long as Trump administration does not trigger too many negative surprises. Earlier this week, Governor Ueda spoke about making a decision on whether to raise rate at the upcoming BoJ meeting. He also shared there is positive views on wage hikes gathering momentum.”

“Deputy Governor Himino also said MPC will discuss next week whether to raise rate or not and to raise rate if economic outlook is realized. He also said ‘In conducting monetary policy, it is difficult but essential to judge the right timing’. We still look for a hike as data continues to support policy normalization. Wage growth pressure remains intact, alongside broadening services inflation.”

“Daily momentum is bearish while RSI fell. Risks remain skewed to the downside. Next support at 154.80 (50 DMA), 154.30 (23.6% fibo retracement of Sep low to Jan high) and 152.80 (200 DMA). Resistance at 156.40, 157.40 (21 DMA). Tactically, in our FX Weekly sent yesterday, we look for short SGD/JPY targeting a move lower towards 110. Entered at 115.10 with SL at 117.12. Cross was last at 114 levels.”

• USD/JPY falls sharply as U.S. consumer inflation data shows slowing core inflation.
• Bank of Japan Governor's hawkish comments lift Yen; U.S. 10-year yields drop 12bps.
• Upcoming Fed speeches and U.S. economic data key for further market direction.

The USD/JPY dropped over 1% in early trading during the North American session as inflation data in the United States (US) resumed its downward trajectory in core figures. The pair trades at 156.33 at the time of writing.

US Dollar falls to 156.33 against Yen following US inflation data that showed a slowdown in core price

The US Bureau of Labor Statistics (BLS) revealed that consumer inflation rose by 0.4% Month over Month, exceeding estimates of 0.3% for an unchanged number compared to November’s reading. Annualized, the Consumer Price Index (CPI) rose 2.9% as expected, up two ticks from the previous reading of 2.7%.

Excluding volatile items, the so-called core inflation expanded by 0.2% MoM, as expected. At the same time, in the twelve months to date, it is up 3.2%, lower than the 3.3% printed in November and projected by economists.

The Yen extended its gains as the USD/JPY slipped from around 157.00 to current spot prices. Following suit, the US 10-year Treasury note yield plunged over twelve basis points (bps) to 4.661%.

Earlier during the Asian session, Bank of Japan (BoJ) Governor Kazuo Ueda was hawkish. He stated that they will hike rates and adjust the degree of monetary support if the economy improves and price conditions continue. He emphasized that Spring wage talks are crucial and noted that BoJ’s branch managers’ meeting showed an encouraging view on pay.

Later in the day, Fed speakers Thomas Barkin, Neel Kashkari, and John Williams will cross the newswires ahead of Thursday's Retail Sales and jobless claims data. The Japanese economic docket is empty for the remainder of the week.

USD/JPY Price Analysis: Technical outlook

The uptrend remains intact, yet the USD/JPY might retreat in the short term. Once sellers pushed prices below the Tenkan-sen of 157.41, that opened the door for further losses. The next key support would be the 156.00 figure, followed by the Kijun-sen at 154.94. The next support would be the 50-day Simple Moving Average (SMA) at 154.74 if cleared.

Conversely, if USD/JPY climbs past 157.00, it clears the path to challenge the Tenkan-sen at 157.41. On further strength, the next resistance will be the 158.00 mark.

The Japanese Yen (JPY) is leading gains amongst the majors, Scotiabank's Chief FX Strategist Shaun Osborne notes.

JPY outperforms following BoJ Governor Ueda comments

"The JPY is leading gains amongst the majors following comments from BoJ Governor Ueda who remarked that he had heard encouraging reports on wages at events over the new year period."

"Swaps reflect strengthening expectations that the BoJ will lift its policy rate at next week’s decision, with 18bps of tightening risk priced in, up from 10bps last week."

"Firm risk appetite is lifting EM/high beta FX, with the core majors outside the JPY lagging and posting only moderate gains on the session."

Further range trading seems likely, probably between 157.30 and 158.30. In the longer run, current price movements are likely part of a consolidation phase, expected to be between 156.50 and 158.50, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD/JPY range trading seems likely

24-HOUR VIEW: "After USD traded in a range on Monday, we pointed out yesterday that 'the price action did not result in an increase in either downward or upward momentum.' We expected USD to 'continue to trade in a range, most likely between 157.00 and 158.00.' USD subsequently traded between 157.10 and 158.20, closing at 157.96 (+0.31%). The price action provides no fresh clues, and further range trading seems likely, probably between 157.30 and 158.30."

1-3 WEEKS VIEW: "Not much has changed since our update yesterday (14 Jan, spot at 157.50). As mentioned, the current price movements are likely part of a consolidation phase, expected to be between 156.50 and 158.50."

• USD/JPY slumps to near 157.00 as BoJ Ueda’s hawkish remarks improve the appeal of the Japanese Yen.
• BoJ Ueda keeps the offer of raising interest rates in the policy meeting on January 23-24 on the table.
• The next move in the USD will be influenced by the US inflation data for December.

The USD/JPY pair falls sharply to near 157.00 in Wednesday’s European session. The asset dives vertically as the Japanese Yen (JPY) strengthens after hawkish remarks from Bank of Japan (BoJ) Governor Kazuo Ueda on Wednesday.

Kazuo Ueda kept the possibility of an interest rate hike in the policy meeting on January 23-24 on the table. Ueda said that the central bank is currently “analysing data thoroughly” and will compile the findings in the quarterly outlook report, and on based on that the bank will discuss whether to “raise interest rates at next week's policy meeting”.

On the wage growth outlook, Ueda said that there was a lot of “positive talk on the wage outlook" when he met BoJ's regional branch managers last week.

Meanwhile, a sharp sell-off in the asset is also driven by a slight decline in the US Dollar (USD) ahead of the US Consumer Price Index (CPI) data for December, which will be published at 13:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, drops to near 109.00.

Investors will keep a close eye on the US inflation data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook. Year-on-year headline inflation is expected to have accelerated to 2.9% from 2.7% in November, with core reading – which excludes volatile food and energy prices – growing steadily by 3.3%. According to the CME FedWatch tool, traders expect the Fed to cut interest rates only once this year.