The USD/JPY pair is currently positioned between 156.8 and 157.0, following four consecutive sessions hovering just below the 157.00 mark. The price has maintained its position within an ascending channel since early December, establishing higher lows starting from approximately 151.7 on the daily chart and around 155.7–156.3 on intraday charts. The pair has moved past the 100-hour moving average around 156.5 and is trading well above the 200-day band, indicating that the prevailing condition remains an uptrend rather than a reversal. The current situation is evident: buyers are actively protecting the 156.2–156.3 area, whereas sellers are positioned around the 157.0–157.7 range, which serves as the upcoming resistance level. The primary factor contributing to the strength of USD/JPY remains the disparity in interest rates. The Bank of Japan has increased its policy rate to 0.75% from 0.50%, marking the second hike in 2025. However, this decision comes with cautious guidance and lacks a clear roadmap for additional tightening measures. The prevailing hesitation results in Japanese yields remaining significantly lower than those in the US, despite market expectations for Federal Reserve rate cuts. The directive for macro funds is clear: maintain short positions on JPY until evidence from Tokyo suggests a change. Simultaneously, Japanese officials are clearly expressing their unease. The finance minister has indicated that authorities are monitoring foreign exchange “with a high sense of urgency” and are prepared to intervene against “excessive and one-sided moves.” The risk of intervention remains the primary constraint on potential gains; however, it has yet to trigger a lasting reversal in USD/JPY.
In the United States, expectations for rate cuts are firmly established; however, the incoming data does not indicate a deteriorating economy. Fed funds futures indicate a probability exceeding 75% for an initial rate cut by March, with market participants generally anticipating two reductions this year, contrasting with the solitary adjustment implied by a split FOMC. Simultaneously, the latest figures indicate a strong performance: initial jobless claims fell to 199k compared to a forecast of 220k, continuing claims decreased to 1.866 million from 1.913 million, pending home sales surged by 3.3% month-on-month against a consensus of 1%, and home-price metrics continue to increase by approximately 0.4% month-on-month and 1.3% year-on-year. The combination limits the dollar’s potential for significant gains across the board while maintaining US yields at levels that bolster USD/JPY at elevated positions. The ongoing political discourse regarding the independence of the Federal Reserve, particularly the calls for a future chair to maintain low interest rates, introduces additional uncertainty. However, this has not yet diminished the yield advantage that the dollar maintains over the yen.
On the 4-hour chart, USD/JPY is currently positioned around 156.8–156.9 within a rising channel that has been established since early December. The price is approaching the upper portion of that structure, with an ascending trendline providing support around 156.3. Recent candles above 157.0 have exhibited small and indecisive movements, indicating consolidation rather than a definitive breakout: the price is coiling beneath a descending resistance line near 157.7, effectively creating a tightening wedge within the larger uptrend. Key intraday resistance levels are identified at 157.0–157.7 initially, followed by 158.6 and 159.25 as subsequent upside targets. Support levels are identified at 156.3 on the 4-hour trendline and at 155.55, which corresponds to the 38.2% Fibonacci retracement. Momentum indicators remain within reasonable limits; the 14-period RSI on intraday charts has retreated from overbought levels and currently resides in the mid-range, allowing for potential upward movement if the right catalysts emerge. The daily USD/JPY chart indicates that the pair remains within a distinct ascending channel. The price is currently positioned above both the 100-day and 200-day moving averages, with the latter significantly below the current level, supporting the notion that this represents a pause in an uptrend rather than a reversal pattern. The recent rebound from approximately 151.7 has established higher lows, and the 14-day RSI still has capacity before reaching traditional overbought levels. In the extended timeframe, immediate resistance levels are concentrated around 159.2 and subsequently at 161.8, aligning with the upper boundary of the existing channel. On the downside, 154.4 represents the initial significant daily support level, succeeded by 151.7, where buyers have previously demonstrated strong interest. As long as closing prices remain above 154.4, the technical outlook on the daily chart remains positive for USD/JPY, with pullbacks more likely to draw interest rather than signal the beginning of a significant downtrend. In the short term, fluctuations in USD/JPY will be influenced by two concurrent risks: US employment statistics and possible measures from Japan. The upcoming US Nonfarm Payrolls release next week represents the initial significant macroeconomic evaluation of the year.
A disappointing jobs report coupled with subdued wage growth would reinforce the anticipation for earlier and more substantial cuts from the Fed, likely exerting downward pressure on US yields and driving USD/JPY back toward 156.3 and potentially 155.5. A robust report, in contrast, would confirm the resilience already evident in jobless claims and housing, potentially driving yields higher once more, invigorating a movement through 157.7 towards 158.6. The potential for Japanese intervention poses a significant risk. Historically, levels around and above the high-150s have prompted official pushback when movements appeared one-sided. Recent updates from Tokyo indicate that officials are willing to accept a slow increase in USD/JPY. However, a rapid surge beyond the 158–159 range without any fundamental catalyst could significantly heighten the chances of a reversal driven by headlines. The presence of that overhang suggests caution against pursuing aggressive late entries at the peak of the recent range. The broader macroeconomic environment is also significant for USD/JPY. Global markets are commencing 2026 with a sustained risk appetite. Gold has been examining the $4,400 level as market participants anticipate a dovish shift from the Federal Reserve alongside ongoing geopolitical uncertainties; silver has risen above $74, influenced by the same narrative surrounding real yields. WTI crude remains positioned above $57.5 a barrel, demonstrating resilience despite last year’s significant decline, influenced by persistent supply constraints and geopolitical tensions. Currently, natural-gas prices are fluctuating between $3.5 and $3.6 per mmBtu, influenced by warm weather conditions in the US and unprecedented production levels. On the rates side, forecasts for advanced economies in 2026–2027 indicate robust growth, with markets actively pricing in Fed easing while anticipating only gradual normalization from the BoJ. This combination supports carry trades financed by low-yield currencies, particularly the yen, and directs capital towards higher-yielding or risk assets.
The current conditions for USD/JPY favor a buy-on-dip strategy, provided there are no sudden disruptions to risk sentiment or an unforeseen shift towards tightening from Tokyo. Considering all factors, USD/JPY is positioned in a technically robust yet politically delicate area. The pair is currently positioned within a well-defined uptrend, consistently trading above significant moving averages, and demonstrating higher lows on both intraday and daily charts. The BoJ’s prudent 0.75% approach, combined with the significant yield differential compared to the US, maintains a structural inclination towards upward movement. The strength of US data is sufficient to avert a drastic decline in yields, despite the market pricing in two Fed rate cuts. Simultaneously, the market finds itself congested close to the upper end of the recent range, increasing the risk of intervention as spot advances into the high-150s. The upcoming US jobs data stands as a significant catalyst that could rapidly alter expectations. Considering that balance, the strategic position here is to Hold instead of pursuing aggressively. The risk-reward profile favors purchasing USD/JPY on pullbacks to the 155.5–156.0 range, with upside targets positioned between 158.6 and 159.2, rather than starting new long positions around 157.0 ahead of NFP and potential intervention risks. The bears do not have confirmation for a prolonged downtrend as long as the levels of 154.4 and 151.7 hold. However, short-term traders may consider fading spikes above 158, ensuring tight risk management. Structurally, the pair maintains a bias towards upward movement; however, at present levels, the most prudent course of action—grounded in the data, positioning, and chart structure—is to Hold. It is advisable to wait for clearer entry points and consider the 156.0–155.5 range as the area for making the next set of higher-probability decisions.