USD/JPY falls ahead of Fed rate decision: support at 156.43

Market activity remains restrained as forex traders await the results of the US Federal Reserve meeting scheduled for 21:00 (GMT+2) today. It is worth noting that they have no doubt about a 25-basis-point rate cut, but expect a more dovish tone from the head of the regulator, Jerome Powell, given the weakening inflation risk. Meanwhile, last week’s US labor market report for November was not published due to the effects of the shutdown. At the same time, the US currency received some support from yesterday’s JOLTS job openings data, according to which the number of vacancies increased from 7.227 million to 7.658 million in September, and from 7.658 million to 7.670 million in October. Traders also paid attention to an increase in the NFIB business optimism index in November from 98.2 to 99.0 points, while the forecast assumed 98.4 points.

Today, Japanese investors are focused on producer inflation data: according to November results, the producer price index remained at 2.7% year-over-year, while on a monthly basis it decreased from 0.5% (revised from 0.4%) to 0.3%. Slowing inflation may hinder the Bank of Japan’s plans to further tighten monetary policy, which currently contradicts the economic strategy of Prime Minister Sanae Takaichi, who supports a dovish stance. In an interview with the Financial Times, the head of the regulator, Kazuo Ueda, said that the country’s economy successfully absorbed the shock of US tariffs: American corporations absorbed part of the tariffs instead of passing them entirely to consumers, while Japanese automotive exporters lowered prices to maintain export volumes and avoid rising unemployment. At the same time, core inflation is approaching the target level of 2.0%. The official’s statements confirm the possibility of a rate hike from 0.50% to 0.75%, which would be the highest level in 30 years (interest rate swaps indicate a 91.0% probability). Ueda also stated plans to increase purchases of government bonds in case of a sharp rise in their yields: recently, 10-year bond yields reached an 18-year high.

Support and Resistance Levels

Bollinger Bands on the daily chart demonstrate a sideways movement: the price range remains almost unchanged and wide enough for current market activity. MACD is rising, maintaining a relatively strong buy signal (the histogram is above the signal line). Stochastic shows more confident growth; however, it is currently near the upper range, indicating the risks of the US dollar being overbought in the ultra-short term.

Resistance levels: 157.00, 157.50, 157.88, 158.50.

Support levels: 156.43, 156.00, 155.50, 154.66.

USD/JPY Trading Scenarios and Forecast

Short positions may be opened after a confident breakout below 156.43, with a target at 155.50. Stop-loss — 157.00. Estimated timeframe: 1–2 days.

A return to bullish momentum followed by a breakout above 157.00 may signal new long positions with a target at 158.00. Stop-loss — 156.43.