The USD/JPY pair remains rangebound as markets brace for an expected interest rate hike from the Bank of Japan (BOJ) this week, with a 92% probability. While the fate of the dollar will largely determine the movement of the Japanese yen, the Japanese yen’s recovery depends on further BoJ guidance and fiscal discipline. Support is seen at 154.40, with resistance around 156 and 157. The pair was last seen around 155.03 levels, noted OCBC forex analysts Francis Cheung and Christopher Wong.
The Japanese yen’s recovery depends on the Bank of Japan and financial caution
“USD/JPY consolidated last week, in the absence of an additional catalyst. A rate hike by the Bank of Japan is largely down to price (92% probability on December 19) and there may not be much room for USD/JPY to venture south unless the US dollar weakens again. We believe USD/JPY will go into the next BOJ meeting looking for clues about 2026 and not just the outcome of the December meeting “The first.”
“We reiterate that any meaningful recovery in the Japanese yen will require not only the Bank of Japan to follow stronger guidance but also for policymakers to show fiscal prudence and for the US dollar to remain weak. Elsewhere, a Reuters poll saw markets expect the cost of borrowing to rise to 1% by the end of September 2026.”
“Moderate downward momentum on the daily chart is intact but the decline in the RSI is moderate. We see consolidation in the meantime. Support is at 154.40 (76.4% Fibonacci retracement from 2025 high to low), 153.90 (50 DMA). Resistance is at 156 (21 DMA), 157 and 158.87 (previous 2025 high).”
