The USD/JPY currency pair is currently fluctuating between 155.40 and 155.60 following a significant intraday recovery, reflecting an approximate increase of +0.5% from the previous lows. The pair momentarily fell below the 155.00 threshold before rebounding toward 155.50, coinciding with a recovery in the US Dollar and an increase in Treasury yields. The Dollar Index has increased approximately 0.4% to around 98.60, which has led to a rise in USD/JPY despite the recent US labor data indicating a weaker growth outlook and an uptick in unemployment to a four-year high of 4.6%. The market dynamics illustrate a two-way scenario: the strength of the yen, driven by the anticipated tightening from the Bank of Japan, is countered by a stronger dollar ahead of the US CPI, resulting in USD/JPY remaining within a broad range of 154–156 instead of following a clear trend.
The US aspect of USD/JPY is influenced by a labor market that is evidently cooling, yet not in a state of collapse. Headline payrolls increased by 64,000 jobs, surpassing the consensus estimate of 50,000. However, this apparent strength was mitigated by significant downward revisions: the previous month was adjusted to reflect a decline of 105,000, and earlier figures were also revised downward. The unemployment rate has increased to 4.6%, marking its highest point in approximately four years, while wage growth has decelerated to about 0.1% month-on-month. The combination indicates a gradual relaxation in labor conditions, which theoretically provides the Federal Reserve with the opportunity to further ease policy in the future. The current market expectations indicate an increased likelihood of rate cuts extending into 2026, thereby limiting the potential appreciation of the dollar. Simultaneously, yields are not experiencing a collapse. The two-year Treasuries are currently trading at approximately 3.51%, while the ten-year is around 4.178%, and the thirty-year is near 4.845%. The yield structure maintains the US carry advantage over Japan, despite the Fed having implemented three rate reductions and the prevailing expectation to sustain the 3.50–3.75% range at the upcoming meeting. In the case of USD/JPY, the dollar exhibits sufficient strength to avert a complete yen squeeze; however, it lacks the robustness needed to support a definitive breakout past the recent 155–157 range without new data to substantiate such a move.
In the context of the yen, USD/JPY operates under the ongoing influence of policy normalization and the potential for intervention risk. Markets anticipate that the Bank of Japan will increase its policy rate by 25 basis points, moving from 0.50% to 0.75%, which would elevate Japanese rates to their highest point in nearly thirty years. Officials have indicated that domestic inflation is approaching the 2% target, wage growth is on the rise, and business sentiment has strengthened, which supports a shift away from ultra-easy settings. The adjustment narrows the policy gap with the Fed incrementally and provides structural support for the JPY. Simultaneously, 155.00 in USD/JPY has previously been characterized by Japanese policymakers as a de facto “line in the sand” concerning intervention risk. The market has absorbed that message: 155 has consistently functioned as both resistance and support, and any movement towards or beyond that level now elicits increased awareness of potential official intervention. The initial daily close beneath 155, marking the first occurrence in roughly a month, indicated that yen buyers were increasingly willing to engage. However, the subsequent rebound towards 155.50 illustrates that mere policy expectations cannot solely propel a consistent JPY rally while US yields remain high.
The overall risk landscape presents a mixed picture, yet it remains generally favorable for higher-beta assets, which in turn moderates the safe-haven demand for the yen. US equity futures indicate a stronger opening, with Dow Jones contracts suggesting an approximate gain of 82 points, S&P 500 futures rising by about 18.5 points, and Nasdaq futures advancing by around 97 points. In Europe, the UK’s FTSE 100 shows a strong performance with a gain of approximately 1.48%. In contrast, Germany’s main index is slightly down at around –0.06%, and France’s benchmark has decreased by about –0.23%. Meanwhile, Italy and Spain are experiencing modest gains, with increases of roughly +0.47% and +0.26%, respectively. Commodities present additional insights: silver rises approximately 3.45% to the $65.92 range, gold remains near $4,317.79 with an increase of about 0.36%, and US crude is trading near $56.22, up roughly 1.92%. Bitcoin is experiencing downward pressure, currently trading at approximately $86,994, reflecting a decline of just under 1%. In the foreign exchange market, the dollar exhibits strength, albeit in a selective manner: EUR/USD is currently trading around 1.1714, reflecting a decline of approximately 0.26% for the day, yet remains above the 1.1700 level and a significant midpoint at 1.16929. Meanwhile, GBP/USD stands as the weakest major currency at approximately 1.3335, down about 0.63% following a surprising dip in UK inflation, with headline CPI decreasing to 3.2% from 3.6%. In the context of USD/JPY, the current environment indicates that the dollar is bolstered by elevated yields and comparative growth. However, the yen continues to serve as a safeguard against the risks associated with a slowdown in China and inflated AI-equity valuations, which constrains potential gains beyond the mid-150s.
The recent fluctuations in USD/JPY are characterized by a competitive struggle centered around the mid-155s. The four-hour chart shows the pair fluctuating between the 200-bar moving average at approximately 155.265 and the 100-bar moving average close to 155.700. Sellers consistently push against the upper band, while buyers are actively supporting dips into the lower band. Earlier in the week, the first close below 155 in a month and a push down toward 155.00–155.40 suggested that bears were finally gaining some control. However, the long lower wicks on recent candles indicate that dip-buyers are still defending a rising trendline that extends back to late October. Momentum indicators align with this analysis: a short-term RSI reading near 56 suggests a phase of consolidation instead of a blow-off top or a definitive breakdown. As long as USD/JPY stays constrained between these four-hour averages, the market is essentially coiling around a pivot, anticipating either the BoJ or US data to provide the next significant impetus.
The level map for USD/JPY exhibits a remarkable clarity. On the downside, immediate support is positioned at approximately 155.00, where intraday buyers have consistently entered the market on multiple occasions. Below that, the 154.35–154.34 area signifies the next critical level; a breach here would create potential movement toward the monthly S1 pivot around 153.28, which serves as a reasonable target if BoJ guidance becomes unexpectedly hawkish or if US data significantly underperforms. On the topside, initial resistance is positioned around 156.30, where previous rallies encountered obstacles, followed by a more significant barrier near 156.95. This level would signify a complete retracement of the recent pullback from the 155.00 area and challenge the tolerance of Japanese officials monitoring volatility. The short-term momentum, along with the positioning of the 50- and 100-period exponential moving averages at 155.46 and 155.48, suggests that the immediate bias is neutral to slightly positive as long as the price remains above these averages. Market participants aiming to capitalize on this perspective have been utilizing pullbacks into the 155.00 range to establish long positions, placing stop-loss orders slightly below 154.35 and setting profit targets in the vicinity of 156.30–156.95. This strategy entails a risk of approximately 65–70 pips in pursuit of gains between 130–195 pips, with the success of this approach being significantly influenced by central bank communications over the next 48 hours.