The USD/JPY is currently positioned between 156.70 and 156.80, reflecting a 12.7% increase from the 2025 low. It is consolidating just below significant resistance as the US dollar index approaches the 98.85–99.00 range. The pair has maintained a range between 154.40 and 157.90 for over six weeks, with price consistently facing resistance near 157.90 and being strongly supported around the mid-154s. Regarding the dollar, Initial Jobless Claims came in at 208,000, slightly below the consensus of 210,000, reinforcing the narrative of a resilient US labor market. This supports the firmness of the USD ahead of Friday’s Nonfarm Payrolls release, where the market anticipates 60,000 new jobs compared to the previous 64,000, along with an expected decrease in the unemployment rate from 4.6% to 4.5%. The yen is showing signs of stabilization following a period of underperformance, as market participants process disappointing Japanese economic data, low consumer confidence, and new tariff discussions from Washington. These factors could introduce risk-off scenarios, yet the interest rate differential continues to favor the dollar.
On the weekly chart, USD/JPY continues to exhibit an upward trend, with the increase from the 2025 low surpassing 12.7% before encountering resistance just below a significant multi-year resistance area. Initial support is positioned at 155.03, which represents the high close from November 2024 and a previous breakout level that has now become a pivot. A sustained weekly close beneath this level would indicate the first significant sign that upside momentum is diminishing. Below 155.03, the subsequent structural support is at 153.65, a significant swing point that corresponds with the 23.6% retracement of the most recent upward movement and the lower parallel of the medium-term pitchfork. Meanwhile, the 151.91–151.94 range, representing the highs of 2022 and 2023, indicates a deeper level where discussions of a genuine trend change would commence if this level is approached. On the topside, the initial resistance is at 157.70, which represents the high-week close for 2025 and the current weekly pivot; a weekly close above this level would indicate that bulls have reestablished control. With a level above 157.70, attention turns to 158.88, the peak from January 2025, followed by the wider range of 160.74–161.95, established by the high-week close and swing high of 2024. The band has consistently capped USD/JPY and will serve as the critical threshold for any efforts to prolong the cycle towards new highs.
On the daily timeframe, USD/JPY has remained within a sideways range, oscillating between approximately 154.40 on the lower end and 157.90 on the upper end for over a month, with the price closely aligned with the ascending 20-day exponential moving average around 156.35. The 20-day EMA has served as a dynamic pivot: declines toward 156.35 have been met with buying interest, maintaining a short-term bullish outlook, while consistent inability to sustain levels above 157.90 indicates selling pressure just beneath the previous high of 158.88. The 14-day RSI at approximately 55.7 is slightly above the 50 midline, indicating a mild trend-following scenario rather than a peak exhaustion. Provided that USD/JPY maintains its position above the 20-day EMA and remains within this range, the most favorable trajectory continues to be a gradual ascent within the uptrend, with 157.90 and subsequently 158.88 identified as the next daily reference levels. A daily close below 156.35 would serve as the initial indication that this consolidation is shifting downward instead of upward, bringing the 154.40 support level back into consideration. Shorter-term structures enhance that perspective. The current analysis positions USD/JPY within a symmetrical triangle, as the price approaches the lower boundary near the 50-period moving average at approximately 156.40. Within that structure, a bullish breakout necessitates a decisive advance beyond the upper trendline and the 157.00 level; validation would be provided by subsequent movement towards 157.70, coinciding with the weekly resistance and the upper target of the triangle. Should the price fall below the lower trendline and 156.40, it would reveal 155.60 as the next target within the established pattern, followed by the wider support range of 155.03–154.40. Throughout the intraday session, the price has moved within a rising channel that is situated within a larger wedge formation. On higher timeframes, a significant support level is observed around 154.50, which has successfully rebuffed several attempts to decline further in recent weeks. As USD/JPY nears 154.50, buyers generally exhibit increased aggression, utilizing this level to set up for a potential rebound toward 157.90–158.88. Conversely, sellers are eyeing opportunities to fade near the upper boundary of the wedge or a clear breach of 156.40, aiming to drive the price back to the 154.50 area and eventually toward the longer-term trendline around 151.00, should momentum shift.
The dollar aspect of USD/JPY continues to find support due to a blend of persistently tight labor conditions and a gradual easing path rather than an aggressive one. In 2025, the Federal Reserve implemented three cuts of 25 basis points each. However, current pricing suggests approximately 62 basis points of easing by the end of 2026, with a probability of about 57% for a first cut potentially occurring as soon as March. This profile does not reflect a central bank in a state of panic; rather, it indicates a measured normalization that maintains elevated short-end US yields in comparison to Japan. Recent US data have shown a mixed performance rather than indicating weakness. The ISM Manufacturing index showed weaker performance at the beginning of the week, whereas the ISM Services index exceeded expectations. Additionally, the ADP employment report remained robust despite a slight shortfall, although Job Openings displayed a decline. Initial Jobless Claims stand at 208,000, compared to a forecast of 210,000, indicating that layoffs continue to be constrained. The forthcoming Nonfarm Payrolls report, anticipated to show a consensus gain of 60,000 and a decrease in unemployment to 4.5%, will serve as a crucial indicator; a significantly stronger outcome would likely lead to expectations of fewer cuts and bolster USD/JPY, whereas a substantial downside surprise would have the contrary effect. Simultaneously, the US dollar index is attempting to surpass the 98.85–99.00 range, with a possible medium-term objective set at 100.25–100.40; a successful breakout in this area would likely enhance demand for the dollar overall, particularly against the yen.
The current context regarding USD/JPY does not support a case for aggressive tightening on the yen side. The most recent wage data from Japan fell short of expectations, while the Tokyo CPI for December was weaker than anticipated, despite inflation continuing to exceed the Bank of Japan’s 2% target. The Bank of Japan maintains that sustainable wage growth is essential for significant policy normalization, and current data indicates that this requirement has not yet been fulfilled. The market is currently reflecting approximately 36 basis points of tightening anticipated over the next year. Should wages and prices continue to show moderation, this pricing may decrease further, presenting a significant risk that no additional hike occurs at all. In terms of sentiment, Japanese Consumer Confidence decreased from 37.5 to 37.2, falling short of the 37.8 forecast, indicating that households are not witnessing strong momentum despite the presence of inflation. The yen has experienced brief periods of strength influenced by risk aversion and tariff news from Washington; however, these fluctuations have generally diminished as rate differentials come back into play. In straightforward terms, the existing policy and macroeconomic disparity between the US and Japan continues to support a stronger USD/JPY, despite intermittent risk-off movements that may briefly bolster the yen.
The upcoming 48 hours present significant catalysts for USD/JPY. Friday’s US Nonfarm Payrolls will influence the front end of the US curve and either support or contest the existing pricing of approximately 62 basis points of Fed cuts. A robust labor report and steady unemployment figures would bolster the dollar, reinforce the effort to break above 157.00, and maintain pressure on the 157.70–158.88 range. A disappointing payrolls report coupled with an uptick in unemployment would heighten the likelihood of more aggressive monetary easing, resulting in lower yields and pulling USD/JPY down to the mid-155s. Simultaneously, a planned Supreme Court opinion day regarding Trump-era tariffs presents headline risk that has the potential to influence global risk sentiment in both directions. Should the Court’s ruling be viewed as a signal for increased tariffs, equity markets may experience volatility, US yields could see a slight decline, and there may be a temporary influx of safe-haven investments into the yen, potentially exerting downward pressure on USD/JPY. Nonetheless, if the overarching story persists that the US economy is experiencing moderate growth with managed inflation and only gradual policy adjustments, risk assets may be able to withstand tariff fluctuations while USD/JPY continues to be influenced mainly by rate and growth differentials.
The immediate trigger for USD/JPY on the upside is a sustained break above 157.00, followed by 157.70. A daily close above 157.00 would invalidate the recent pattern of lower intraday highs and indicate that buyers have reestablished dominance in the near-term range. A weekly close above 157.70, which represents the 2025 high-week close and median-line region, would signify a proper resumption of the broader uptrend and pave the way to retest 157.90, followed by the previous swing high at 158.88. If USD/JPY manages to surpass 158.88 with a strong weekly close, the subsequent technical target is the 160.74–161.95 range established by last year’s high-week close and swing high. The specified zone is anticipated to be a point where trend followers may realize substantial profits, and macro traders will likely evaluate the viability of the prolonged yen weakness narrative. A move into that band would likely necessitate a blend of robust US data, a dollar index exceeding 100, and ongoing letdowns from Japanese inflation and wage figures.