USD/JPY Struggles Below 158 as Dollar Lacks Conviction Post-ISM Beat
USD/JPY traded within a narrow range on Wednesday, easing to a low of 156.89 before recovering slightly amid broad dollar weakness and U.S. equity gains. The pair failed to sustain any meaningful rally despite upbeat ISM manufacturing data, which showed its highest level since April 2024, and hawkish comments from Richmond Fed President Thomas Barkin about inflation risks. Speculative positioning in USD/JPY remains light as traders await next week’s U.S. jobs data and the return of post-holiday liquidity, leaving the pair capped below 158.
Technically, USD/JPY faces strong resistance near the 158.09 December high and price congestion between 157.80-158.09. A sustained break above these levels could open the door for a test of the July 16 high at 158.85, potentially triggering increased volatility as bullish momentum builds and intervention risks rise. On the downside, immediate support lies at the 156.94 9-day exponential moving average, with the weekly Ichimoku cloud top at 155.62 providing more robust protection. A dip below 155.62 would signal a potential shift in sentiment, exposing further downside risks.
Focus now shifts to next week’s U.S. jobs data, with one-week risk reversals showing waning demand for yen calls post-ISM. Market participants will also monitor developments surrounding Japanese investment flows and geopolitical concerns, such as Nippon Steel’s lawsuit against the U.S. government. Until a breakout above 158.09 or below 155.62 occurs, USD/JPY is likely to remain range-bound, dictated by near-term technical levels and broader risk sentiment.
