The USD/JPY pair traded sideways during the Asian session on Wednesday, hovering around 156.30, as the Japanese Yen (JPY) reversed a modest dip against a softer US Dollar (USD) but lacked strong bullish conviction. Market participants remain cautious amid mixed fundamental signals, including Japan’s fiscal concerns, uncertain timing for the next Bank of Japan (BoJ) rate hike, and dovish expectations for the US Federal Reserve (Fed).
BoJ signals and fiscal concerns keep yen bulls restrained
The Japanese government’s approval of Prime Minister Sanae Takaichi’s record-setting ¥122.3 trillion budget has fueled concerns about Japan’s fiscal position. At the same time, investors remain uncertain about when the BoJ will implement further rate hikes, despite Governor Kazuo Ueda indicating that monetary policy would continue to tighten if economic and price developments align with forecasts. Ueda emphasized that gradual adjustments in policy support aim to sustain economic growth while encouraging moderate increases in wages and prices.
The BoJ outlook pushed yields on rate-sensitive two-year and benchmark 10-year Japanese government bonds (JGBs) to multi-decade highs, narrowing Japan’s rate differential versus other major economies. This dynamic has restrained aggressive bearish positioning on the yen amid speculation of potential intervention, keeping USD/JPY relatively contained.
US macro data keeps dollar on the defensive
The US Dollar struggles to gain momentum as dovish Fed commentary and uncertainty surrounding US monetary policy under President Trump weigh on the Greenback. Market focus is now on a series of critical US economic releases later this week, including the ADP private-sector employment report, ISM Services PMI, and JOLTS Job Openings on Wednesday, ahead of the Nonfarm Payrolls (NFP) report on Friday and consumer inflation data next Tuesday.
These reports are expected to provide clear cues on the Fed’s rate-cut trajectory, which will heavily influence USD/JPY direction in the near term.
Technical outlook: 156.15 confluence key for further downside
From a technical perspective, USD/JPY remains above a key support zone at 156.15, which aligns with the 100-period Simple Moving Average on the 4-hour chart and the lower boundary of a short-term ascending channel. A decisive break below this confluence could trigger further bearish momentum.
Momentum indicators suggest limited follow-through for now. The MACD histogram sits slightly below zero, indicating fading bearish momentum, while the Relative Strength Index (RSI) at 52 reflects a neutral stance with a modest bullish tilt. The rising SMA supports a buy-on-dips strategy, but subdued momentum readings signal that gains may be capped.
Immediate resistance is located near 157.15, corresponding to the upper boundary of the channel. A clear break above this level could open the path for additional upside, whereas failure to breach it is likely to keep USD/JPY contained within the current range.
Ready to start trading Forex? Join iXBroker today and kick-start your trading journey now!
