USD/JPY Loses Ground as Japanese Tightening Expectations Build

Traders' Opinions

Summary:

USD/JPY slips toward 158.00 as hawkish BoJ signals and safe-haven demand support the Yen, while strong US employment data and Fed tightening expectations limit the Dollar’s downside.

SELL USDJPY

EXP

TRADING

157.950

Entry Price

153.400

159.100

158.026 -0.435 -0.27%

0.0

Pips

Flat

153.400

Exit Price

157.950

Entry Price

159.100

USD/JPY is edging lower during Monday’s European session, trading near 158.00 after recording modest gains in the previous trading day. The Japanese Yen is finding support from increasingly hawkish signals from the Bank of Japan (BoJ), with policymakers indicating that further monetary tightening remains appropriate as inflation moves closer to the central bank’s 2% objective.

The September meeting minutes revealed broad support among policymakers for additional interest-rate increases, strengthening expectations that the BoJ could deliver another hike in December. Although the central bank left borrowing costs unchanged at its latest meeting, its continued focus on inflation risks has kept markets alert to a potential shift toward tighter policy. Former BoJ chief economist Seisaku Kameda also expects a December increase, followed by further adjustments that could take interest rates toward 2% next year.

The Yen is receiving additional support from its traditional safe-haven appeal as investors respond to renewed risk aversion. ABN Amro strategists noted that recent defensive positioning has favoured the Japanese currency over the US Dollar, adding to the downward pressure on USD/JPY.

Meanwhile, the Greenback is facing some resistance from retreating oil prices after US President Donald Trump suggested further military action against Iran was unlikely if nuclear negotiations continued to progress and the Strait of Hormuz remained open. Lower energy prices have eased some inflation concerns, although the Dollar’s losses remain contained by resilient US economic data and expectations of further Federal Reserve tightening.

October Nonfarm Payrolls increased by 165,000, comfortably exceeding the 65,000 forecast, while the Unemployment Rate declined to 4.1% from expectations of 4.2%. These figures have pushed market-implied expectations of a 25-basis-point Fed rate increase in December above 78%, according to CME FedWatch. Attention now turns to Tuesday’s US Consumer Price Index and Friday’s Producer Price Index, which could provide further direction for the Dollar and USD/JPY.

Technical Analysis

USD/JPY is showing signs of weakening on the four-hour chart, trading around 157.96 after struggling to sustain upward momentum near the 158.60–158.80 resistance zone. Recent price action suggests that buyers are losing control, with repeated attempts to push higher failing to establish a convincing breakout.

The pair has been consolidating within a broad range, but the latest rejection around the upper boundary raises the possibility of a bearish reversal. The immediate support area sits around 156.95–157.10. A decisive break below this zone would strengthen the bearish outlook and could open the way toward the next support region around 155.30–155.50.

The projected price structure points to a potential decline toward 155.40, followed by a temporary recovery or retest before another downward move. If selling pressure remains strong, the broader downside target lies around 153.30–153.50. This would represent a deeper correction from the recent consolidation range.

However, the bearish scenario would weaken if USD/JPY reclaims the 158.30 area and establishes a sustained move above the 158.60–158.80 resistance zone. Until that happens, the repeated rejection at resistance keeps downside risks elevated.

TRADE RECOMMENDATION

SELL USD/JPY

ENTRY PRICE: 157.95

STOP LOSS: 159.10

TAKE PROFIT: 153.40

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