FX.co ★ USD/JPY: Analysis and Forecast

Today, the Japanese yen is attracting some safe-haven flows but failing to sustain momentum, remaining within the familiar range held over the past week. This comes amid uncertainty surrounding the Bank of Japan's rate hike plans. Political uncertainty in Japan could compromise the Bank of Japan's ability to tighten its monetary policy. At the same time, bullish sentiment in equity markets continues to undermine the yen's appeal as a safe-haven currency.

Additionally, US Treasury yields have surged again, fueled by concerns over US President-elect Donald Trump's inflationary policies, which may limit the Federal Reserve's ability to cut interest rates. This further restricts the yen's strength.

Threats of tariffs from Trump could weigh on investor sentiment, dampening optimism in the market. This bolsters the yen's status as a safe-haven currency and necessitates caution before opening aggressive bullish positions in the USD/JPY pair. Moreover, Japanese authorities are likely to intervene to support the national currency if deemed necessary.

Technical Analysis

From a technical perspective, USD/JPY is consolidating near the 100-period Simple Moving Average (SMA) on the 4-hour chart, which serves as a key resistance level.

Mixed signals from oscillators on the daily and hourly charts suggest prudence, advocating for traders to wait for a sustained break below last week's swing low near 153.20 before positioning for further losses. A drop below the 153.00 level could trigger additional weakness, with spot prices targeting the next significant support at 152.50 and ultimately heading toward the critical 200-day SMA, currently near the psychologically significant 152.00 level.

On the other hand, the 154.70 level now serves as a strong immediate barrier. A sustained move beyond this level, coupled with further strength above the psychological 155.00 level, could push USD/JPY toward the supply zone at 155.50. Momentum may extend further, with prices targeting the significant 156.00 level before aiming for a retest of the multi-month high near 156.75, last reached on November 15.