USD/JPY Price Forecast: Pair Holds Above 155 As BoJ And US CPI Set Up A Major Break

USD/JPY Trades Around 155–156 As The Biggest Binary Week Of 2025 Unfolds

USD/JPY is holding in the 155.50–156.00 band after probing above 155.60 in early Asia and grinding higher into the European session. Over the last seven trading days the pair has slipped only about 1%, a shallow pullback given the prior rally, and spot remains clearly above the 155.00 shelf that many macro and real-money accounts treated as near-term support. Price action is blunt: despite a dovish US inflation surprise, an already delivered Fed rate cut and a fully priced 25 bp BoJ hike, the yen has not managed a meaningful recovery and the broader bull trend in USD/JPY is still intact on higher timeframes, even as momentum visibly cools.

Macro And Policy Crossroads For USD/JPY

US CPI Undershoot, Fed Path And The Dollar Leg Of USD/JPY

The dollar side of USD/JPY is being driven by a tension between weaker data and stubbornly cautious Fed guidance. November headline CPI came in at 2.7% year-on-year against expectations around 3.1%, with core readings also softer than forecast. That single print forced a quick repricing of the Fed curve: markets now assign roughly a 73–76% probability that the January 28, 2026 meeting keeps rates at 3.75%, but they have lifted the odds of a March 18 cut to 3.50% to about 45–46%, bringing forward the expected timing of easing that had been pushed toward late Q1 or Q2. Even with that shift, the US Dollar Index is only marginally higher around 98.5, reflecting how the softer inflation trend is slowly undermining the “higher for longer” narrative. Fed Governor Christopher Waller has stressed that the FOMC is in no rush to cut and wants clearer evidence that inflation is pinned down, while Atlanta Fed President Raphael Bostic has explicitly said that inflation is still more worrying than the labor market. The result is a macro backdrop where the data steadily argue for earlier and deeper easing across 2026, but the communication tries to slow that repricing. For USD/JPY, this means the medium-term rate advantage is starting to erode even as the short-term carry remains attractive.

BoJ Normalization To 0.75% And Domestic Drivers For The Yen In USD/JPY

On the yen side, this week’s Bank of Japan decision is decisive for USD/JPY because it marks another step away from the ultra-easy regime that anchored the pair’s uptrend for years. Consensus is for a move from 0.50% to 0.75%, a three-decade high and a continuation of the shift that began when negative policy rates were abandoned in 2024. Fresh Japanese inflation data provide the justification: annual CPI has climbed back toward 3.0% from 2.7% in August, confirming that price pressures have not simply faded and could become more problematic if policy stays too loose. At the same time, the growth backdrop is fragile. Revised Q3 GDP showed a 0.6% contraction versus an initial -0.4%, underlining that Japan is tightening into weak output and heavy fiscal burdens. That leaves Governor Kazuo Ueda walking a narrow line: he must show that the BoJ is serious about bringing inflation under control, but an overly aggressive stance risks destabilizing Japan’s sovereign profile and confidence in domestic demand. Markets assume the 25 bp step is essentially guaranteed; what matters now is how explicitly Ueda ties the move to a path of further hikes into mid-2026. A clear signal that additional tightening is “likely” would improve the medium-term outlook for the yen; a cautious, one-and-done tone would blunt the impact of the hike and leave USD/JPY vulnerable to another push higher.

Yield Gap, Fiscal Anxiety And Intervention Risk As Core Anchors In USD/JPY

The structural context still favors a strong USD/JPY level even after accounting for BoJ normalization. The US 10-year yield trades more than 350 basis points above its Japanese equivalent, so the absolute rate gap remains wide despite the Fed’s first 25 bp cut in September and the expected BoJ hike to 0.75%. That spread underpins the long-running carry trade: investors still get paid to be long dollars and short yen, and that incentive has repeatedly capped the depth of yen rallies. Layered on top of this is domestic fiscal anxiety in Japan. With public debt already exceptionally high and limited political appetite for sharp consolidation, investors doubt that the BoJ can move quickly or far without forcing uncomfortable questions about the government’s funding costs. That skepticism caps how much tightening the market is willing to price. At the same time, the memory of 2024’s interventions near 160 is still fresh. When USD/JPY approached that zone, Japanese authorities stepped in decisively, triggering a sharp yet temporary reset lower. With spot now comfortably above 155 and the yen-weakening trend that began after Takaichi’s LDP leadership victory still broadly in place, the probability of intervention will climb rapidly if BoJ communication disappoints and the pair starts to probe the high-150s again. Those three forces – the yield spread, fiscal limits and the threat of official action – jointly explain why spot is sticky at elevated levels rather than collapsing ahead of the BoJ.

Short-Term Price Behaviour: Shallow Pullback Inside A Still-Bullish USD/JPY Structure

Short-horizon price action depicts USD/JPY as a market caught between entrenched buyers and a slowly strengthening counter-trend. VT Markets highlights that the pair advanced to roughly 155.60 in early Asian trading on Thursday and then edged toward 156.00 during Europe as the dollar caught support ahead of CPI and after Waller’s comments. FXStreet’s day-to-day coverage also notes that the pair has remained above the 155.00 handle and even extended through that support overnight, despite a completed Fed cut, soft US payrolls and a fully priced BoJ hike. That resilience in the face of seemingly yen-positive news is typical of a still-dominant buy-the-dip regime. At the same time, FOREX.com’s broader lens shows that over the last week, USD/JPY has given back close to 1%, with selling interest beginning to accumulate as traders position for a more forceful BoJ and for US inflation that now looks decisively softer at 2.7%. On the daily chart, that translates into a clear loss of upside momentum: price has pulled back from recent highs and is drifting toward key moving averages instead of grinding to fresh peaks.

Key USD/JPY Levels: 157.48 As Ceiling, 154.31 As Pivot And 150.83 As Structural Support

The technical map for USD/JPY is now organized around one overhead band and two critical downside levels. On the topside, resistance near 157.479 marks the most recent swing high and the upper edge of the current consolidation; bulls need a break and hold above that zone to re-ignite a clean, trending move into year-end. On the downside, the first pivot sits around 154.313, where the 50-period moving average and the 23.6% Fibonacci retracement cluster with prior price congestion. Trading below this area would confirm that the pair has moved out of a simple uptrend into a more balanced regime where sellers have credible control. Deeper still, support at 150.831 is the key line in the sand, matching the long-term rising trendline that has underpinned the advance in USD/JPY across 2024–2025. A drop into that support would represent a meaningful correction; a break under it on closing terms would signal a potential transition from a long-running bull trend into a broader distribution phase where the yen could finally mount a sustained comeback. Right now spot sits in the upper half of that range, nearer to resistance than to the structural floor, which tilts asymmetry toward downside if the BoJ and CPI combination fails to impress dollar bulls.

Momentum Signals: RSI, MACD And A Tiring Multi-Month USD/JPY Rally

Momentum indicators reinforce the idea that USD/JPY is late in its current impulse. The daily RSI has rolled over from overbought territory and is edging down toward the neutral 50 mark. A clean move below that level would indicate that sellers are dominating over the last 14 sessions and would typically herald more consistent downward pressure rather than just noisy mean-reversion. The MACD histogram is fluctuating below zero, which shows that short-term moving averages now lean toward the bearish side even if the signal is not yet extreme. Meanwhile, price has started to gravitate toward the 50-period moving average after spending months comfortably above it, another sign that upside force is fading. Bulls still control the multi-month structure as long as USD/JPY holds above the 150.83 trendline, but they are no longer in a position to push the pair higher without resistance; momentum is clearly no longer one-way.

Event Sequence: CPI, BoJ Communication And Scenario Map For USD/JPY

The next several sessions are dominated by a clean two-step event path that will define the next leg in USD/JPY. The US side is already partly resolved: CPI at 2.7% year-on-year rather than 3.1% has undercut October’s 3.2% core as a sign of persistent stickiness and convinced markets that the first 2026 cut to 3.50% could arrive as early as March rather than later in the first half. The Fed’s messaging – Powell insisting inflation remains too high, Waller warning against premature easing, Bostic emphasizing the inflation risk over jobs – now looks more like an attempt to slow the market than a reflection of the underlying data. On the Japanese side, the base case is a move to 0.75% with guidance that “further gradual hikes” are probable by mid-year if inflation remains near 3.0%. If the BoJ simply endorses that view without adding anything stronger, the step is unlikely to be enough by itself to trigger sustained yen strength. In that outcome, USD/JPY can easily stay anchored above 155 and retest 157.5 as long as US yields do not collapse. If, however, Ueda leans harder into the inflation narrative, hints at a steeper tightening path, or signals more tolerance for yen strength, markets will begin closing the rate gap more aggressively, and the pair could slide toward 154.3 and potentially deeper. Any sharp post-decision rally back toward the high-150s will also immediately raise the probability of renewed Japanese intervention, which would amplify volatility and potentially force rapid position adjustments.

Positioning, Options And Volatility Around 155–156 In USD/JPY

Flows and options positioning highlight how tightly coiled USD/JPY now is. VT Markets points out that spot near 155.60–156.00, with CPI and the BoJ decision back-to-back, is an almost textbook setup for volatility strategies such as straddles that benefit from large swings in either direction. Implied volatility around current strikes and open-interest distributions suggest that traders expect a meaningful move but have not aligned decisively on a directional view. On the spot side, intraday orderflow still shows robust demand on dips toward 155.00 from short-term traders who are reluctant to stand against the established uptrend before seeing the BoJ outcome. In contrast, macro funds and some real-money accounts have started to trim long exposure and probe the short side, arguing that a combination of softer US inflation, a live BoJ hiking cycle and elevated spot levels near resistance offers an attractive entry point to fade the dollar. This split is exactly why the pair has only fallen about 1% over the last week: the one-way “short yen at any price” mindset is fading, but it has not yet flipped into a consensus long-yen trade.

Risk–Reward View On USD/JPY: Tactical Sell Bias With Scope Toward 150.8 If BoJ Confirms A Shift

Taking all inputs together, the balance of probabilities now points to a cautious bearish bias on USD/JPY over the coming months, even if near-term price action remains choppy and headline-driven. The US side is softening: inflation at 2.7% with market pricing shifting toward an earlier cut to 3.50% undermines the durability of the dollar’s rate premium, and a more dovish 2026 path is now embedded in forwards. The Japanese side is turning less accommodative: a move to 0.75% against inflation near 3.0% confirms that the BoJ is no longer anchored at the lower bound and is prepared to tighten further if necessary. Technically, the pair is trading in the 155.50–156.00 area below the 157.479 ceiling with RSI sliding toward 50, MACD in negative territory and price bending back toward key averages; that is a classic profile of a tired uptrend with growing downside risk. The main argument against a bearish stance – the still-huge 350+ bp yield spread and structural fiscal concerns in Japan – is already visible in how high USD/JPY trades even after a Fed cut and ahead of a BoJ hike. That leaves risk–reward skewed in favor of a tactical Sell stance in the 155–156 band, with an initial downside focus on 154.313 and an open path toward the 150.831 trendline if BoJ communication is more hawkish than expected and the Fed path continues to lean toward earlier easing. The bullish alternative, in which the BoJ under-delivers and US yields rebound enough to drive a break above 157.5 and a renewed run at the high-150s, is still possible, but from current levels that upside appears more limited than the potential downside embedded in the long-term support zone.

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