USD/JPY Extends Three-Day Decline as BoJ Keeps December Hike in Focus

Summary:

USD/JPY falls for a third consecutive day as the BoJ’s inflation outlook and firm Tokyo CPI strengthen expectations of a December rate hike. A weaker US Dollar and declining Treasury yields add to the Yen’s support.

Sell USDJPY

EXP

PENDING

157.000

ENTRY

153.400

TGT

158.500

157.544 -0.143 -0.09%

Point

PENDING

153.400

TGT

CLOSING

157.000

ENTRY

158.500

USD/JPY remained under pressure on Friday, extending its decline for a third consecutive session as the Bank of Japan’s latest policy decision reinforced expectations that further monetary tightening could be approaching. The pair slipped below the mid-157.00 region during Asian trading after the central bank maintained its benchmark interest rate at 1.25%, in line with market expectations.

The BoJ’s decision was reached by an 8-1 vote, with board member Takata favouring an immediate rate increase. Although policymakers opted to keep borrowing costs unchanged, the accompanying statement maintained an inflation outlook that could support another move higher. The central bank expects underlying inflation to remain around levels consistent with its price stability target, while acknowledging that risks to the price outlook are tilted to the upside. Combined with an unexpectedly firm Tokyo CPI reading earlier in the session, these signals have strengthened speculation that the BoJ could raise rates as soon as December.

The Yen is also benefiting from renewed weakness in the US Dollar. Hopes that diplomatic efforts could eventually bring an end to the US-Iran conflict have reduced some demand for the Greenback, while declining US Treasury yields are narrowing the interest-rate advantage that has supported USD/JPY. This shift in yield dynamics is particularly relevant for the pair, as a smaller US-Japan rate differential makes the Yen relatively more attractive.

However, traders may remain cautious about extending bearish positions before hearing from BoJ Governor Kazuo Ueda at the post-meeting press conference. His assessment of inflation, economic conditions and the timing of future policy adjustments could determine whether markets maintain their December rate-hike expectations. For now, the combination of a potentially more hawkish BoJ outlook and softer US Dollar demand leaves USD/JPY vulnerable to additional selling pressure.

Technical Analysis

USD/JPY is showing renewed bearish momentum on the H4 chart after failing to sustain its recovery above the 157.50 resistance region. The pair recently rebounded from around 156.10, but the recovery stalled below the previous swing highs, producing another lower high before sellers pushed the price back towards 157.00. This price action suggests that the recent upward correction may have run its course, with the broader structure beginning to favour further downside.

The 157.45–157.55 region is now an important resistance area. It previously acted as a consolidation zone, but the latest price movement shows that buyers have struggled to reclaim it. As long as USD/JPY remains below this level, selling pressure could persist. A sustained move beneath 157.00 would strengthen the bearish case and expose the next major support around 155.20, where the market previously found buying interest.

If sellers maintain control and the 155.20 support zone gives way, the decline could extend towards the 153.20–153.40 region. This lower area represents the next significant downside objective on the chart. However, a recovery above 157.55 would weaken the immediate bearish setup, while a stronger break above 158.70 would invalidate the current downside projection.

TRADE RECOMMENDATION

SELL USD/JPY

ENTRY PRICE: 157.00

STOP LOSS: 158.50

TAKE PROFIT: 153.40

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

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3188

Win Rate

63.82%

P/L Ratio

0.73

Focus on

XAUUSD, EURUSD, GBPUSD

Related Analysis

USD/JPY Extends Three-Day Decline as BoJ Keeps December Hike in Focus

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