USD/JPY Technical Outlook: Bulls Test New Highs Amid BoJ Uncertainty

At the same time, pressure on the US currency came from data on inflation expectations from the University of Michigan. The one-year outlook for November was revised down sharply from 4.7% to 4.5%, while the five-year estimate was reduced from 3.6% to 3.4%, which is seen as a signal for the Federal Reserve regarding potential rate cuts in the future. According to the CME Group FedWatch Tool, about 65.0% of surveyed analysts believe that the key rate will remain in the 3.75–4.00% range, although much will depend on incoming macroeconomic data over the coming weeks.

Meanwhile, the yen remains under pressure due to rising uncertainty over the Bank of Japan’s monetary policy, continuing its strong downward trend since Sanae Takaichi was appointed prime minister. At present, the national currency is one of the weakest among its Group of Ten peers, which sharply increases the risk of new interventions by the regulator, which has already resorted to this mechanism several times in the past to influence market conditions. Takaichi, it should be recalled, is a proponent of a “dovish” approach, which is seen as necessary for her proposed fiscal reforms. On Friday, Japan’s Cabinet approved a new stimulus package worth 21.3 trillion yen — the largest since the COVID-19 pandemic. The initiative is aimed at supporting a slowing economy and offsetting inflation costs for households. The document is based on three priorities: containing price growth, strengthening economic potential, and expanding the country’s defense and diplomatic capabilities. Starting in January, the government will introduce direct subsidies to households of about 7,000 yen per family for three months. Additional support will be provided to regions, with subsidies for electricity and gas costs and a temporary repeal of the gasoline tax. In parallel, Tokyo is creating a 10-year fund to develop shipbuilding and is reaffirming its course to increase defense spending to 2.0% of GDP by 2027. Takaichi stated that the package will be financed from current budget revenues, while the shortfall will be covered by issuing government bonds. Increased borrowing may add pressure to Japanese bond yields and create additional risks for the yen in the medium term.

On Friday at 01:30 (GMT+2), November inflation data for the Tokyo region will be released. Forecasts suggest that the annual reading will slow from 2.8% to 2.7%, easing expectations of a potential policy tightening at the Bank of Japan’s December meeting. In addition, October figures for industrial production and retail sales will be published at 01:50 (GMT+2): analysts expect production to fall by 0.6% m/m following a 2.6% increase previously, while retail sales may rise by 0.8% after a 0.5% gain the previous month.

Support and resistance levels

Bollinger Bands on the daily chart point to a strong upward trend, with the price range expanding to the upside and opening the way for further local highs. The MACD is turning lower, forming a new corrective impulse (the histogram is moving below the signal line). The Stochastic shows similar dynamics, pulling back from extreme levels that previously signaled significant overbought risks for the dollar in the very short term.

Resistance levels: 156.90, 157.50, 158.18, 159.00.

Support levels: 156.00, 155.50, 155.04, 154.50.

Trading scenarios and USD/JPY forecast

Short positions can be opened after a confident breakdown below 156.00, with a target at 154.50. Stop-loss: 156.90. Implementation period: 2–3 days.

A return of bullish momentum followed by a breakout above 156.90 may become a signal to open new long positions with a target at 159.00. Stop-loss: 156.00.