USD/JPY Extends Rally After Japan’s GDP Drop, Targets 158.88

The US dollar is strengthening as expectations grow that the Federal Reserve will keep interest rates unchanged at the December 10 meeting. According to the CME FedWatch Tool, markets currently assign a 51.1% probability that the rate will remain at 4.00% and 48.9% probability of a –25 bps cut, compared to 33.1% and 66.9% a week earlier. Meanwhile, after the government shutdown ended, federal employees have returned to work, and macroeconomic statistics will begin flowing to analysts this week. However, some key data series may have been lost, complicating the Fed’s assessment and encouraging policymakers to adopt a cautious wait-and-see approach.

Support and Resistance Levels

The long-term trend remains bullish: this week the price broke above the 154.80 resistance level and is heading toward the January high of 158.88. In the event of a correction into the 152.98 support area, long positions targeting the weekly high at 155.70 will become relevant. However, if 152.98 is breached, the decline may extend toward the trend boundary at 150.20.

The medium-term trend is also upward: in October the price broke through Zone 2 (152.14–151.59) and moved into Zone 3 (157.46–156.92). Long positions are preferable on a pullback from the support range 150.48–149.98 with targets at 152.86 and 155.73. If this area breaks, the trend will shift to a bearish one with potential movement toward 145.57–145.11.

Resistance levels: 158.88, 161.93.

Support levels: 152.98, 150.20, 148.48.

USD/JPY Trading Scenarios and Forecast

Long positions may be opened from 152.98 with a target at 155.70 and a stop-loss at 152.10. Expected duration: 9–12 days.

Short positions may be opened below 152.10 with a target at 150.20 and a stop-loss at 152.98.