The USD/JPY pair is currently positioned between 155.8 and 156.0, having made a significant recovery from the 152.0 level reached during last week’s de-leveraging concerns. The pair has regained the 155.0 level, reached an intraday peak close to 155.98, and is currently approaching a significant resistance zone between approximately 155.5 and 156.5. The specified zone corresponds with a 0.5–0.618 Fibonacci range derived from the most recent downswing, identifying 155.67 as the 0.5 retracement level and 156.51 as the 0.618 level. Additionally, it aligns with significant short-term moving averages and a four-hour 200-period reference point. The daily structure continues to exhibit higher highs and higher lows from the 140.0 base and the 152.0 pullback. However, the latest movement indicates that it is no longer a straightforward ascent; the price is currently facing resistance in the 155.0–156.5 range rather than advancing without restraint. The recent decline in the dollar can be attributed primarily to political factors and signaling, rather than a significant downturn in US economic data. The US president publicly stated that a weaker dollar was “great,” a remark that initially contributed to widespread selling activity. The shift occurred when the new Treasury Secretary Scott Bessent expressed unease regarding significant dollar weakness prior to the recent FOMC decision, while another prominent individual, Kevin Hassett, retracted the implications of endorsing a weaker currency.
The nomination of Kevin Warsh to succeed Jerome Powell at the Fed has been interpreted as a hawkish indicator. Markets interpreted the “Warsh shock” as a shift towards more stringent balance-sheet management and a reduced tolerance for persistent inflation. The Federal Reserve’s policy remains within a range of 3.50% to 3.75%, while futures pricing indicates approximately 48 basis points of cuts anticipated by the end of the year; however, these expectations are currently subject to risk. ISM Manufacturing has reported approximately 52.6, marking the highest new-orders reading since 2022. Additionally, jobless claims have stabilized, and further high-quality data is expected as delays related to shutdowns are resolved. Should that data continue to exceed expectations, the likelihood of fewer cuts rises, thereby providing mechanical support for the dollar leg in USD/JPY via yield differentials. The recent recovery from 152.0 to 156.0 aligns with the ongoing repricing: the pair had faced significant selling pressure driven by narrative rather than data, and the current macro environment is compelling short sellers to reevaluate their positions. On the yen side, there has been little movement that would warrant a fundamental shift towards a bullish phase for the JPY. The central bank maintained its current interest rates during the latest meeting, while slightly adjusting growth and inflation projections upward due to the influence of expansionary fiscal policy. The forward guidance remains ambiguous: interest rates could increase further if the outlook is met, and the price trends in April will be a crucial indicator for any subsequent action. The policy rate remains close to zero, in contrast to the US, which is several percentage points above. Simultaneously, the political landscape is steering towards the same outcome.
Japan is approaching a sudden lower house election on 8 February, with the prime minister explicitly stating that a weak yen serves as a “significant advantage” for exporters. Simultaneously, she is suggesting a suspension of the consumption tax on food, prompting inquiries regarding the sustainability of fiscal discipline in the long term. The interplay of a soft currency and a more relaxed fiscal approach does not incentivize safe-haven investments in JPY. Market participants observing the current environment find minimal motivation to oppose a robust trend in USD/JPY unless the finance ministry clearly indicates or carries out intervention measures. Until then, the underlying factors continue to support elevated levels, rather than a lasting recovery of the yen. The primary driver sustaining the prolonged upward trajectory in USD/JPY is the carry trade. Entities secure low-cost loans in yen, convert these funds into dollars, and invest in higher-yielding US assets, while managing currency risk by maintaining a long position in USD/JPY. This has been established since the Federal Reserve commenced its rate hikes in 2022. The pair surged from the 110–120 range to 150.00, subsequently testing the 160.00 area. Capital consistently flowed from JPY to USD as the rate spread and the search for yield intensified. Japan faces the challenge that this mechanism has the potential to extend excessively. A declining currency poses a significant threat of accelerating inflation beyond the economy’s capacity, compelling the Bank of Japan to implement unanticipated interest rate increases. That is precisely the reason why authorities intervened near 150.00 in 2022 and subsequently around 160.00 in 2024, with actions taken in April and July that halted the upward movement and caused USD/JPY to decline significantly. The episodes established a distinct psychological barrier around 160.00. Whenever the price approaches the high-150s, it is understood that the likelihood of an official response increases. Holding a position at 159.0, an intervention could lead to a significant decline within minutes. The existing asymmetry suggests that the ongoing rally, despite its strength, is expected to encounter significant resistance as the 159.0–160.0 range re-emerges. The carry trade continues to present an appealing opportunity amidst elevated US yields. However, as the pair advances further, the stability of those long positions diminishes, given their proximity to potential intervention risks.
Shorter-term charts illustrate the extent to which this move has become both stretched and resilient. In the four-hour analysis, USD/JPY has exhibited a nearly vertical ascent from its low around 152.0, successfully closing a previous gap and surpassing it, subsequently consolidating within the 155.5–156.0 range. The region currently consolidates several key indicators: a previous resistance level from the earlier upward movement, the 0.5–0.618 Fibonacci retracement of the recent decline with 155.67 and 156.51 serving as reference points, and the four-hour 200-period moving average. The intraday price movement has formed a rising wedge pattern, often indicating a deceleration in momentum despite the upward trend continuing. Momentum indicates a cooling trend. On the one-hour chart, the RSI is positioned around 66, indicating a strong level but not yet reaching typical blow-off extremes. Meanwhile, the daily RSI has rebounded from near oversold levels back toward the mid-range following the recent selloff. The current profile indicates a transition in the market from panic liquidation to a phase of measured re-risking. On the daily chart, the price is fluctuating near the 15- and 20-day moving averages, both of which are trending upwards. The pair momentarily dipped beneath those levels during the flush and is currently striving to maintain its position above. If the spot can maintain closes above the 155.5–156.0 range, those averages will revert to functioning as clear dynamic support; a failure in this area would pave the way for a further decline to reassess lower levels. From a technical standpoint, the range of 154.45–155.00 represents the initial demand zone to monitor during pullbacks, considering its historical significance as a pivotal breakout area. Support levels are positioned at 154.83, followed by 153.78, and then at 152.12, which marks the recent multi-month low. On the upper side, resistance emerges at 156.51, followed by 157.62, and then the high-beta range between 159.0 and 159.24, leading up to the 160.0 intervention level.
Analyzing the trend structure, USD/JPY continues to establish higher highs and higher lows on the weekly chart, driven by the same rate differential that fueled the parabolic movements observed in 2022, 2023, 2024, and the recent surge from April last year into early 2026. The performance of those legs, however, has not exhibited smoothness. Whenever the market heavily favors long positions, it becomes highly susceptible to even a slight shift in narrative. The most recent flush reflects a de-leveraging event initiated by policy remarks, discussions of intervention, and strategic profit-taking within an overcrowded position. The observation that price has established support once more above 152.0, significantly above the 140.0 level where the previous major panic subsided, indicates that the underlying bull trend remains intact. The present stage is more accurately characterized as an evaluation of trends rather than a shift in trends. The range of 155.0 to 155.5 is currently serving as a validation line. Maintaining a position above that range preserves the medium-term narrative: the carry trade continues to be appealing, US economic indicators are robust, the Bank of Japan’s normalization process is slow, and political motivations in Tokyo still support a weaker currency. Maintaining that band is crucial; a sustained loss could elevate the risk of a more significant correction towards 152.0, and possibly even the previous 140.0 support level, particularly if US data weakens or if there is a drastic shift in the Fed’s leadership approach. Currently, the macroeconomic environment does not indicate such an extreme scenario; labor market data, ISM surveys, and trade flows continue to suggest resilience in the US, while Japanese policy is structured to prevent a severe tightening that could hinder growth.