USD/JPY Slips as Yen Gains Haven Support Ahead of Key BOJ Speech
USD/JPY declined 0.2% on Monday, trading within a 156.92-157.97 range as risk-off sentiment pressured the pair. The yen benefited from a third consecutive drop in the S&P 500 and growing anticipation of a potential 25-basis point rate hike by the Bank of Japan at its January meeting. Treasury yields held steady, and a 5-month high in oil prices limited USD/JPY’s losses, but the pair remained under pressure. Market attention now shifts to BOJ Deputy Governor Himino’s speech and press conference, where his comments could underline yen weakness as a policy concern, further fueling speculation of a more hawkish BOJ stance.
Technical Analysis
Technically, USD/JPY is approaching key levels that could define its near-term trajectory. Immediate support lies near the 21-day Bollinger Band and the December 25 low at 156.92, with additional support at 156.02 (December 31 low) and 155.97 (December 20 low). A close below 155.97 would confirm a bearish shift, opening the door for a deeper correction toward the November 6 high at 154.70. On the upside, resistance is seen at 158.09 (December 26 high) and 158.88 (post-U.S. payrolls high). A break above these levels would signal a resumption of bullish momentum.
Market Outlook
The focus remains on Tuesday’s BOJ events, with Deputy Governor Himino’s remarks potentially paving the way for a January rate hike. Speculative positioning reflects rising odds for tightening, with OIS pricing a 50% chance of a hike. If Himino strikes a hawkish tone or equity markets extend their decline, yen crosses could see further selling, reinforcing USD/JPY’s bearish bias. Conversely, a more cautious BOJ stance or renewed dollar strength could see the pair test resistance at 158.09.