The Japanese yen stands at a critical crossroads: USD/JPY experienced a textbook display of market psychology over the past 24 hours. With yesterday’s close at 155.756, the pair rebounded to above 155.85 during the early Asian session, snapping a three-day losing streak. The driver of this rebound was not US dollar strength, but rather a market repricing of Bank of Japan (BoJ) rate hike expectations. BoJ Governor Kazuo Ueda’s pivotal remarks from earlier in the week became the inflection point, as he expressed confidence in Japan’s economic outlook and explicitly stated that the December policy meeting would weigh the merits of a rate hike. This commentary directly propelled Japanese Government Bond (JGB) yields to multi-year highs, supporting yen appreciation. However, this upward momentum also triggered profit-taking behavior, causing USD/JPY to rebound in the short term.

The US Dollar Index (DXY) painted an entirely different picture. On Tuesday, DXY declined by 0.08% before recovering 0.05%, reflecting broader global bond market volatility. T-note yield movements emerged as the critical determinant of dollar direction, signaling lingering market skepticism about the Federal Reserve’s rate cut path. USD/JPY currently oscillates within the crucial 155.50-156.76 band, with upside resistance at 156.35 and 156.64, and downside support at 155.57 and 155.28. A breakout above 156.76 would open the door for further advances toward 157.91 or even 158.80; conversely, a breach below 155.00 could test the second support at 153.60.

Investors must closely monitor one critical dynamic: BoJ rate hike prospects have emerged as a major global market risk factor. Japan’s potential rate increase impacts not just the yen, but sent shockwaves through cryptocurrency markets—with $643 million in crypto liquidations and Bitcoin and Ethereum falling 5.2% and 5.4% respectively on December 1st. This reflects the impact of yen appreciation on yen carry trades, where rapid unwinding can trigger violent market swings. Going forward, USD/JPY will remain hypersensitive to rate expectations ahead of the BoJ’s December 18th final decision, with each adjustment to hike probabilities potentially igniting fresh volatility.

Daily Chart

Examining the daily chart, USDJPY has been in a steady uptrend over recent weeks, currently above 155, indicating strong medium-term bullish momentum. The 50-day and 200-day moving averages stand near 152.6 and 148.0 respectively, and the price remains well above both, confirming bullish strength. The Bollinger Bands are slightly widening, signaling increased volatility. The MACD is in positive territory, moving further apart, reinforcing upward momentum. Overall, the daily chart shows a healthy bullish trend with no evident reversal signs.

1H Chart

The hourly chart over the last 3-5 days displays a short-term bullish consolidation. After finding support near 155.40, the price gradually climbed and broke above the short-term resistance around 155.70. Short-term moving averages suggest strengthening bullish momentum, with Bollinger Bands widening to show increased short-term volatility. Additionally, the MACD shows a bullish crossover, indicating potential strength in the next 24 hours. Notably, an ascending flag pattern has formed recently, hinting at a probable continuation of the upward movement.

Technical Trend: Decisively Bullish

Technically, USDJPY maintains a solid bullish trend on the daily chart, with MACD widening positively and expanding Bollinger Bands indicating strong medium-term momentum. On the hourly chart, bullish MACD cross and the formation of a flag pattern suggest short-term continuation higher. However, the pair faces risks from possible BoJ rate hikes and volatile US data. Traders should watch key price zones between 155.50 and 156.00 closely, as breakouts or breakdowns here could lead to significant moves.

Today’s economic calendar (GMT+1) has no direct major events affecting USDJPY. The US will release the ADP employment report at 14:15, expected to show a significant decrease in job additions, possibly signaling economic slowdown. A weaker-than-expected print could pressure the US dollar and consequently the USDJPY pair downward. Watch also for later US data like the ISM Non-Manufacturing Index, which may further influence the USD’s strength and USDJPY’s volatility.

Resistance & Support

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