Markets speculate that Japanese authorities may intervene to curb further yen weakness, which could discourage aggressive short positioning against the yen. On the other hand, with markets expecting another Fed rate cut this month, the dollar is struggling to attract meaningful buying interest, potentially limiting upside room for USD/JPY. Recent Japanese economic data and policy signals present a complex picture: manufacturing remains weak, domestic demand stays resilient, and monetary policy may be shifting. In November, Japanese manufacturing activity remained in contraction but at a slower pace. The S&P Global Manufacturing PMI rose from 48.2 in October to 48.7, marking the slowest contraction in nearly three months. Midstream industries and investment goods sectors remain sluggish, while consumer goods show slight improvement. New orders have declined for two and a half years; companies largely attribute weak demand to a gloomy global economic environment, tighter client budgets, and insufficient capital investment. Demand shrinkage is particularly notable in the automotive and semiconductor sectors. Meanwhile, input cost inflation accelerated for the fourth consecutive month, driven mainly by higher labor costs and raw material prices, prompting firms to raise their selling prices. Despite near-term pressures, business confidence over the next 12 months has risen to a ten-month high, supported by recovering demand in electronics and transportation as well as expectations of new product launches. Against a backdrop of weak economic data alongside structural adjustments, the BoJ is considering a policy shift. Governor Kazuo Ueda noted that the central bank will assess the pros and cons of raising rates at its December policy meeting—the clearest signal yet of a possible hike. He said the Japanese economy is expected to rebound from the Q3 contraction, and the impact of U.S. tariffs is lower than previously feared. With tariff risks easing, the likelihood of achieving the BoJ's price and economic forecasts is increasing. Ueda stressed that Japan is now at a stage where wage growth trends must be tested, and wage growth will decisively influence the timing of rate hikes. Amid sustained high corporate profits, worsening labor shortages, and major business groups advocating pay raises, wage issues have become central to monetary policy discussions.

The dollar fell to a two-week low on Monday. The ISM reported that the U.S. manufacturing PMI dropped to 48.2 in November from 48.7 in October, below market expectations. Combined with recent weak U.S. data, it suggests growth in the world's largest economy is cooling. Dovish signals from Fed officials have fueled speculation of another rate cut this month. In fact, CME Group's FedWatch tool shows an almost 88% probability of a 25-basis-point cut at the Fed's December 9th–10th meeting. This stands in sharp contrast to the BoJ's hawkish stance and may restrain USD/JPY movements. Before the Fed's rate decision next week, investors will closely watch the release of the U.S. Personal Consumption Expenditures (PCE) Price Index—the Fed's preferred inflation gauge—for more clues about the future rate-cut path. However, due to the recent federal government shutdown, official employment reports have yet to be released, adding to market uncertainty.

Regarding the daily chart, the Bollinger Bands are expanding upward, moving averages are diverging higher, and the bullish trend remains intact. After stabilizing near the middle band, the price momentum shown by MACD weakens somewhat. RSI is at 56, indicating strong bullish sentiment. As long as price holds above the middle band, there is a high probability of testing the upper band and round-number resistance levels near 157.6 and 160. In the weekly chart, Bollinger Bands are also expanding upward, moving averages diverge higher, and MACD has formed a golden cross with both lines back above the zero line, signaling a return to bullish territory. RSI stands at 67, showing investors are predominantly in buy mode. If the weekly candlestick closes with a long lower shadow, the pair is likely to rise toward the previous high near 158.8. In the short term, investors should focus on buying the dips.

Trading direction: Buy

Entry price: 155.8

Target price: 158.8

Stop loss: 154

Support: 154.7/153.2/150

Resistance: 154.7/153.2/150