USD/JPY Falls Sharply as Markets Brace for PCE and Jobless Claims

Summary:

USD/JPY slid to two-week lows as dovish Fed expectations, soft US data, and political uncertainty around future Fed leadership outweighed support from the Bank of Japan’s tightening signals.

Sell USDJPY

EXP

Trading

154.800

ENTRY

151.500

TGT

156.500

155.066 -0.152 -0.10%

Point

Flat

151.500

TGT

CLOSING

154.800

ENTRY

156.500

USD/JPY extended its decline on Thursday, sinking to fresh two-week lows as renewed expectations for a Federal Reserve rate cut, weaker US data, and political speculation weighing on the dollar overshadowed early support from the Bank of Japan.

The pair’s early Asian-session rebound stalled at 155.50, a level that has repeatedly capped upside attempts this week. The failure to break higher triggered renewed selling pressure during the European session, pushing USD/JPY through Monday’s low of 154.65 and briefly touching the 154.50 region—a level last seen two weeks ago.

The move reflects a broader shift in sentiment: the market has gradually unwound dollar-long positions, with investors increasingly convinced that the Federal Reserve will begin easing as early as next week. Even cautious remarks from the Bank of Japan were not enough to reverse the trend.

Bank of Japan Governor Kazuo Ueda offered a mild lift to the dollar earlier in the day, signalling that the BOJ remains committed to tightening policy in the coming months. Ueda reiterated that Japan is transitioning away from its ultra-loose monetary stance, though he admitted uncertainty regarding how far interest rates might eventually rise. Markets viewed his comments as supportive of gradual yen strength, but not forceful enough to materially shift the near-term policy divergence narrative.

What truly weighed on the dollar, however, was renewed pressure on the Federal Reserve’s credibility and trajectory. ADP employment data, released Wednesday, showed an unexpected contraction in private payrolls for November—adding to signs that the US labour market is beginning to cool more rapidly than anticipated. The sudden deterioration increased expectations that the Fed will deliver not just one cut, but potentially signal a broader easing cycle heading into Q1.

Traders are now watching Thursday’s US Jobless Claims, which could reinforce the growing case for easier policy. But the data may only serve as a prelude to the week’s main event: the long-delayed US Personal Consumption Expenditures (PCE) price index for September, scheduled for release Friday. With inflation softening and labour market conditions weakening, a dovish shift from the Fed appears increasingly likely.

Adding another layer of uncertainty, speculation surfaced in Washington that Kevin Hassett, former White House economic adviser under Donald Trump, may be under consideration to replace Jerome Powell when the Fed Chair’s term expires in May. According to a Financial Times report, Hassett would be expected to pursue a significantly more accommodative policy agenda aligned with Trump’s preference for low rates and cheap borrowing conditions.

That report rattled fixed-income markets—already sensitive to political interference in monetary policy—and intensified bearish pressure on the US Dollar. Bond investors expressed concern that a shift toward politically motivated easing could weaken the dollar’s structural support at a time when fiscal risks remain elevated.

Technical Analysis

From a technical perspective, USD/JPY is showing clear signs of a deeper bearish correction after repeated failures to sustain gains above the 155.50–156.00 resistance band. Momentum has shifted firmly toward the downside, with the H4 chart forming a succession of lower highs, indicating fading bullish pressure.

A decisive break below 154.50 would likely accelerate downside momentum, opening the door toward 152.80, which aligns with a significant Fibonacci and structural support zone. A deeper extension could target the 151.50 region—an area where buyers previously defended aggressively following April’s BOJ-related volatility.

For now, the bearish outlook remains intact as long as the pair trades below 156.50, a level that would need to be reclaimed to neutralize downside risk and restore bullish momentum.

TRADE RECOMMENDATION

SELL USDJPY

ENTRY PRICE: 154.80

STOP LOSS: 156.50

TAKE PROFIT: 151.50

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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

Articless

1910

Win Rate

63.73%

P/L Ratio

0.72

Focus on

XAUUSD, EURUSD, GBPUSD

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