The USD/JPY pair declined to 155.67 on Wednesday, managing to recover a portion of the significant losses incurred in the prior session. The decline was influenced by renewed pressure on the US dollar, as market expectations for a more extensive Federal Reserve easing cycle gained momentum. Investor focus domestically is sharply directed towards the potential for an interest rate increase by the Bank of Japan during its December meeting. Recent hawkish signals from certain BoJ officials have highlighted this possibility, contrasting with market perceptions that Prime Minister Sanae Takaichi’s government prefers more accommodative monetary conditions.
This week, Finance Minister Satsuki Katayama aimed to mitigate any perceived policy divide, asserting that there is no inconsistency between the government’s and the central bank’s economic evaluations. This statement highlights the ongoing official focus on the alignment of fiscal and monetary policy. Her remarks came after a speech by BoJ Governor Kazuo Ueda, who conveyed optimism regarding Japan’s economic prospects and affirmed that the central bank will meticulously consider the benefits and drawbacks of a rate hike during its December policy assessment. On the H4 chart, USD/JPY is currently experiencing a downward correction phase after its rapid ascent in mid-November. The pair is currently positioned beneath the significant resistance threshold of 156.76, establishing a possible reversal pattern in proximity to the lower Bollinger Band. Selling pressure continues, highlighted by the market’s inability to maintain a position above the indicator’s middle band.
A decisive break below the 154.66 support level would indicate a more significant correction, aiming for the region of prior local lows. On the other hand, a consistent recovery and a close above 156.76 would serve as the initial technical indication of a possible recovery, paving the way for the pair to revisit the 157.90–158.00 resistance area. On the H1 chart, USD/JPY is experiencing an upward correction following a rebound from support at 157.91. Nonetheless, the potential for growth seems limited by the upper Bollinger Band. As buyers strive to surpass the intermediate resistance level of 158.40, the price action continues to exhibit volatility and lacks a definitive directional trend. The technical analysis indicates a period of lateral consolidation with a tendency towards downward movement. Keeping the price under 158.45 heightens the probability of revisiting 157.91. A decline past this threshold would reinforce the negative outlook, aiming for the lower limit of the existing range. A confirmed bullish shift necessitates a sustained move above 158.45, accompanied by a breakout towards the range of 158.80–159.00.
The USD/JPY pair is currently stabilizing after its recent downturn, reflecting a balance between a weakening US dollar and shifting anticipations regarding Bank of Japan policy. The technical framework observed in both timeframes indicates a prudent, range-constrained setting, currently leaning towards a downward trajectory. The upcoming directional catalyst is expected to be the BoJ’s December meeting. In the short term, traders should monitor for a breakout beyond the 156.76–154.66 range on the H4 chart to gain a clearer indication of the pair’s next major movement.