USD/JPY Stabilizes After Hitting Year-To-Date Low, BOJ Speculation Weighs
USD/JPY trimmed losses on Wednesday after sliding to a year-to-date low of 155.93, driven by falling U.S. Treasury yields and rising expectations for a Bank of Japan rate hike in January. The softer U.S. CPI report pushed 2-year Treasury yields to 4.27%, erasing gains made after the payrolls report and raising concerns about further dollar weakness. Speculation surrounding a potential BOJ rate hike is intensifying, with Governor Kazuo Ueda and Deputy Governor Ryozo Himino citing improved wage growth and persistent import costs. Finance Minister Katsunobu Kato’s alarm over yen volatility further bolstered expectations of policy action, supporting the yen.
Technical Analysis
Technically, USD/JPY remains under pressure but holds key support. The pair found support at the lower 21-day Bollinger Band near 155.86, with additional protection at the psychological 155 level. Resistance lies at 157.16, the 21-day moving average, followed by congestion near 157.20-40 and the session high at 158.08. A sustained break below 155.86 could open the door for further declines toward 155.00, while a move above 157.40 would signal a recovery, targeting 158.08 and beyond.
Market Outlook
Market attention turns to upcoming economic data and central bank developments. With consensus growing for a BOJ rate hike in January, yen strength may persist, particularly through crosses like EUR/JPY, where rate differentials are narrowing. On Thursday, Japan’s corporate goods prices and U.S. jobless claims could influence sentiment. Additionally, uncertainty surrounding the incoming Trump administration’s tariff and dollar policies may limit USD/JPY’s upside. Until clarity emerges, the pair is likely to remain range-bound, with the 155.81–158.80 Bollinger Band acting as a key reference for traders.