USD/JPY Eyes a Breakout as BoJ Signals Policy Shift

Several members of the Board of Governors have recently expressed support for further monetary tightening. Asahi Noguchi stated that the regulator may return to a “hawkish” stance, as the risks associated with unstable U.S. trade tariffs have eased significantly, while prolonged low interest rates could negatively impact the economy by weakening the national currency and accelerating inflation. Earlier, BoJ Governor Kazuo Ueda made similar remarks, which substantially increased the probability of an interest rate adjustment at the December meeting. Macroeconomic data also supports the officials’ view: the Japanese yen pushed the USD/JPY pair to a new high near 158.00, while inflation rose from 2.1% to 2.2%.

Meanwhile, the government is preparing to issue more than 11.5 trillion yen (approximately 73.5 billion USD) in government bonds to finance Prime Minister Sanae Takaichi’s economic stimulus package — significantly higher than the previously planned 6.7 trillion yen. According to the Ministry of Finance, tax revenues in the current fiscal year could reach a record 80.7 trillion yen, creating a surplus of about 3.0 trillion yen, which should at least partially reduce the government’s need for additional borrowing, although the overall debt burden will remain significant.

The U.S. dollar has stabilized around 98.50 on the USD index, while data from the Chicago Mercantile Exchange (CME) FedWatch Tool show that the probability of a 25 basis point rate cut in December has increased to 84.9%, up from 30.0% last week. U.S. markets are closed today and tomorrow for the Thanksgiving holiday, which will significantly reduce trading volatility.

Under these conditions, a continuation of the upward movement in the USD/JPY pair appears to be the most likely scenario.

Support and resistance levels

On the daily chart, the instrument reversed near the first-order level (I) at 156.75 and continues to move within a corrective structure. Most likely, quotes will continue their upward movement toward the intersection of the left first-order resistance (I) and right third-order resistance (III) at 157.33, and then toward the intersection of the left third-order resistance (III) and right second-order resistance (II) at 160.58. In the case of a decline, the targets will be the intersection of the right third-order support (III) and left second-order support (II) at 154.18, and the intersection of the left second-order support (II) and right second-order support (II) at 152.26.

Resistance levels: 157.33, 160.58.

Support levels: 154.18, 152.26.

Trading scenarios and USD/JPY outlook

Long positions can be opened after the price consolidates above 157.33, with a target at 160.58. Stop loss — around 156.00. Implementation period: 7 days or more.

Short positions can be opened after the price consolidates below 154.18, with a target at 152.26. Stop loss — around 155.00.