The USD/JPY pair is currently trading within a narrow range of 154.80–155.40, following a test of intraday peaks close to 155.65 before retreating slightly. The pair has recorded three consecutive days of gains this week, rebounding from last week’s decline towards 152.50 and establishing a new one-week high in the 155.35–155.40 range. From an intraday perspective, the asset continues to operate within an ascending channel, maintaining a position well above the 100-hour moving average. The recent pullback has effectively allowed the short-term RSI to ease from overbought levels, rather than indicating a complete reversal. The current layout is clear: short-term support is positioned at approximately 154.99 and 154.63 within the hourly framework, whereas the upper pivot is identified in the 155.65–155.99 range that limited today’s advance. As long as USD/JPY remains above the low-155s, the market perceives this as a managed pause within a continuing rebound, rather than the initiation of a new downward movement.
On the daily chart, USD/JPY continues to show an upward trend within a larger ascending channel established during the 2023–2024 basing phase. The 50-day moving average is positioned well above the 200-day average, indicating a traditional bullish setup that reinforces the uptrend instead of suggesting a sideways market. The price is currently positioned significantly above the ascending 200-day EMA at approximately 152.63, which has consistently served as a dynamic support level. Recent recoveries from this area indicate that major market participants continue to uphold the overarching trend. The recent decline from the January swing high has seen the pair recover the 38.2% Fibonacci retracement and is currently testing the 50% level near 155.79. In addition, the 61.8% retracement level at approximately 156.64 and the 78.6% zone around 157.86 represent the subsequent medium-term resistance levels. On the upside beyond the Fibonacci cluster, previous extension targets and daily channel resistance converge around 157.42 and then nearer to 160.07, which is where the market last began to factor in a significant risk of official pushback. On the downside, structural supports are positioned initially at 154.60 and 153.90, followed by deeper levels at 152.84 and the 152.50–152.15 range, which aligns with the 200-day EMA and the previous swing low. A sustained break below the 152 area would indicate that the multi-month bullish trend is weakening and that the channel has transitioned into a topping structure. Momentum readings indicate a market that has shed the panic experienced during last week’s decline, yet has not yet reached a state of euphoria. During the mid-2025 rally, the daily RSI reached approximately 62, while USD/JPY was positioned above 155.00, suggesting robust upward momentum with additional space before entering traditional overbought conditions. Following the recent correction, the RSI has retreated toward the 50 level, indicating a neutral stance that aligns with a consolidation phase rather than signaling a shift in trend.
MACD has moved above its signal line near the zero axis, and the histogram has shown a slight positive shift, indicating a strengthening yet not overwhelming bullish sentiment. When considering the current indicators, an RSI near 50 coupled with a slightly positive MACD typically suggests a market in the process of regaining momentum following a shake-out. Upside movements are expected to encounter resistance at significant retracement levels like 155.79 and 156.64, yet there is no definitive indication that sellers have reestablished dominance. In the 60-minute perspective, USD/JPY is contained within an ascending channel that commenced from the lows of last week, just above 152.50. The recent movement to 155.65 extended the upper limit and elevated the 14-hour RSI into overbought conditions, resulting in the ongoing intraday retreat to approximately 155.36. Despite the recent retracement, the price continues to hold well above the 100-hour moving average, indicating that the short-term trend remains upward. Intraday participants are monitoring 154.99 and 154.63 as the initial significant downside levels within the channel. Should the pair maintain its position above those levels, the most favorable trajectory remains directed towards a retest of 155.65, followed by 155.99. A more pronounced decline toward 152.84 and 150.31 would only be considered if the channel breaks and daily momentum shifts significantly downward, which currently represents a risk scenario rather than the primary outlook.
The fundamental backing for USD/JPY continues to be the significant disparity in interest rates between the United States and Japan. The Federal Reserve maintains the federal funds rate within a 5.25–5.50% range. Despite indications of softer growth, the Fed continues to signal that any cuts will be gradual and limited, rather than indicative of an aggressive easing cycle. The current market pricing reflects an expectation of potentially two reductions this year, rather than a swift return to levels seen before the rate hikes. Conversely, the Bank of Japan maintains a significantly accommodative approach, with the policy rate positioned at approximately –0.10%, accompanied by only tentative discussions regarding normalization. Despite Japanese inflation gradually approaching its target, the central bank remains far from a tightening cycle similar to that of the Fed over the last two years. The 5.25–5.60 percentage-point spread between headline policy rates, along with a 10-year US yield close to 4.32% compared to approximately 0.85% on Japanese government bonds, maintains USD/JPY in a yield-driven bullish environment. As long as that gap remains substantial, there is a compelling mechanical motivation for capital to shift from low-yielding yen to higher-yielding dollar assets, thereby maintaining demand for the pair during downturns.
The recent macroeconomic data from Japan introduces additional complexity while maintaining the overall narrative. Headline national CPI decelerated to 1.5% year on year in January, down from 2.1%, while the ex-fresh-food measure decreased to 2.0% from 2.4%. The core-core measure, excluding fresh food and energy, decreased to 2.6% from 2.9%. The latest readings are the softest observed since early 2022, indicating to markets that the inflation surge is diminishing rather than gaining momentum. In January, exports experienced a significant increase of 16.8% year on year, surpassing the consensus estimate of 12%. Conversely, imports declined by 2.5%, contrary to the anticipated rise of 3%. The merchandise trade deficit showed a significant improvement, narrowing to approximately –1.15 trillion yen, compared to the anticipated –2.14 trillion and a slight surplus in December. This development illustrates how the interplay of a weaker yen and increased overseas demand is positively influencing external balances. This combination diminishes the urgency for swift interest rate increases. The Bank of Japan faces challenges in asserting that inflation is out of control, especially with headline CPI at 1.5% and core metrics showing a decline, alongside wage growth that remains insufficient to ensure persistent price increases. Consequently, markets are currently extending their timelines for significant tightening and anticipating a slow transition away from negative rates. For USD/JPY, this indicates that the most significant factor contributing to yen strength – a clear pivot from the BoJ – remains off the table, despite disinflation alleviating some pressure on households and diminishing political urgency.