USD/JPY Price Forecast: 155 Test Puts 2-Day BoJ Decision in Focus
USD/JPY made a brief pop above 155 during early European trading as the Japanese yen weakened ahead of Thursday's Bank of Japan two-day...
Quick overview
- USD/JPY briefly rose above 155 as the yen weakened ahead of the Bank of Japan's policy meeting, with speculation about a potential rate hike.
- Market caution persists due to upcoming US inflation data and the BoJ decision, leading to short-term positioning rather than a significant sentiment shift.
- The BoJ's policy expectations are driving yen movements, with improved domestic conditions suggesting a possible normalization of policy.
- The US dollar struggles to recover amid mixed labor market data and rising unemployment, limiting its progress against the yen.
USD/JPY made a brief pop above 155 during early European trading as the Japanese yen weakened ahead of Thursday’s Bank of Japan two-day policy meeting, and markets are speculating the BoJ is on the cusp of its first rate hike in years.
USD/JPY’s gains are, however, contained near term, as markets keep a cautious eye on Thursday’s US inflation data and Friday’s BoJ decision. What’s driving the near-term yen selling is still short-term positioning rather than a real shift in sentiment, with traders not wanting to put too much on the line before the US inflation data & the BoJ decision.
The BoJ Rate Hike Expectation is what’s driving the Yen
BoJ policy expectations are still the central player. Governor Kazuo Ueda has made it clear that Japan is getting closer to its inflation target with domestic conditions improving gradually. And that’s got everyone speculating that policy normalization might be coming sooner than expected.
This view has also eased concerns about Japan’s rising fiscal spending under Prime Minister Sanae Takaichi, making investors more confident that Japan’s longer-term policy stability is sound. Adding to the mix, global investors are getting nervous about slowing growth in China & stretched valuations in AI-linked stocks, a backdrop that usually supports the yen.
US Labor Data is Slowing the Dollar Recovery
The US dollar has had a rough time making up ground amid softer labour market data. November jobs actually came in higher than expected at 64,000, but it was a mixed bag. The October jobs numbers were revised down to a 105,000 decline, and the September numbers were trimmed too.
The real deal, however, is that the unemployment rate has risen to 4.6%, while wage growth slowed to 0.1% m/m, suggesting the Federal Reserve still has room to cut interest rates. Markets are now pricing in more rate cuts in 2026, which is why the dollar can’t really make any further progress right now.
USD/JPY Technical Situation & Levels
Looking at the technicals, USD/JPY is trading around 155.55 after a modest rebound from the 155.40-155.00 support zone. It’s worth noting that the long lower wicks on recent candles suggest that buyers are defending the rising trend line from late October, rather than just bailing out.
Key levels to watch out for are:
- Support: 155.00 & then 154.35
- Resistance: 156.30, followed by 156.95
- Momentum: RSI is hovering around 56, which is a sign of consolidation, not quite yet a full-blown crash
As long as USD/JPY can stay above the 50 EMA (155.46) & the 100 EMA (155.48), then the short-term bias remains neutral to mildly positive – but something’s still needed to give this market some direction.
Trade idea: If you think there’s value near 155.00, you could go long, targeting 156.95, keep a stop below 154.35.
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