The USD/JPY pair is currently stabilizing around 156.57 on Wednesday, taking a breather following three straight days of upward movement. This stability persists even in light of a significant change in the statements made by Bank of Japan Governor Kazuo Ueda, who indicated that the central bank is nearing a sustainable achievement of its 2% inflation target – a clear indication that a policy tightening action may be on the horizon. The market is currently factoring in the likelihood of a rate hike at the upcoming BoJ meeting next week. Investors will closely monitor Governor Ueda’s comments following the meeting, as these insights are likely to influence the policy outlook for 2025. The yen’s overall decline is driven by increasing worries regarding Japan’s public finances, worsened by heightened fiscal expenditures under Prime Minister Sanae Takaichi’s administration. Furthermore, the significant interest rate gap between Japan and other major economies continues to encourage short positions against the yen, which remains one of the world’s lowest-yielding currencies.
On the H4 chart, USD/JPY continues to exhibit a bullish structure after a significant impulse that drove the price from 154.30 to the critical resistance area of 157.20–157.90. The pair is presently in a consolidation phase just beneath the 157.20 level, a point where selling pressure has been observed in the past. The price maintaining its position above the middle Bollinger Band indicates that buyers continue to hold the upper hand in the market. The widening of the upper band signifies increased volatility and implies that the market is building momentum for a renewed effort to overcome resistance. A clear breakout and sustained consolidation above 157.20 would pave the way towards the 157.90–158.00 range. In the event of a correction, the closest notable support level is at 155.60. A breach beneath this level would indicate a more significant retracement, possibly aiming for the primary demand area and the lower Bollinger Band around 154.30.
On the H1 chart, USD/JPY is experiencing a pullback following its recent rise to 157.20. The decline has encountered preliminary support close to the middle Bollinger Band, as the pair seeks to establish stability around 156.50. The short-term framework continues to exhibit bullish characteristics, bolstered by the price’s location above the central Bollinger Band. Dynamic support is establishing itself within the 156.00–156.10 range, corresponding with the lower band of the indicator. The Stochastic oscillator has declined from overbought territory, validating the ongoing short-term corrective phase. To facilitate the continuation of the uptrend, it is essential for buyers to regain the 157.20 level, thereby setting the stage for a potential test of 157.90. On the other hand, a persistent drop below 156.00 would serve as the initial definitive indication of bullish fatigue, heightening the likelihood of a more significant downturn towards 155.60.
The USD/JPY pair finds itself at a pivotal point, balancing bullish technical momentum against a changing fundamental landscape for the yen. Although the pair’s uptrend continues to be technically sound, the upcoming BoJ decision presents considerable event risk. A shift towards a more hawkish stance from the central bank may trigger a significant correction. In the short term, the resistance at 157.20 and support at 156.00 are crucial; a breakout from this range will dictate the subsequent directional movement.