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The USD/JPY pair fell to 158.16 on Friday as the Japanese yen continued its recovery from earlier this week. Market participants are increasingly focused on the upcoming Bank of Japan (BoJ) meeting, hoping for clearer signals regarding the future pace of interest rate hikes.

The regulator is widely expected to keep its policy parameters unchanged at the next meeting. However, investors are already pricing in the next rate hike as early as June. BoJ Governor Kazuo Ueda recently reiterated that the central bank remains ready to tighten policy if economic momentum and inflation dynamics continue to align with official forecasts.

Additional support for the yen came from renewed concerns over possible currency intervention as USD/JPY approached the psychologically important 160 level. Japanese authorities have repeatedly warned against sharp, unilateral exchange rate movements, increasing market sensitivity in this zone.

At the same time, political uncertainty continues to weigh on the yen. Markets are factoring in the possibility of early parliamentary elections. According to media reports, Prime Minister Sanae Takaichi may announce the dissolution of the lower house in an effort to push forward a more active fiscal policy. Further details are expected to be presented to representatives of the ruling coalition on 19 January.

Technical Analysis

On the H4 chart, USD/JPY has corrected to the 157.90 area. For today, it is relevant to consider the potential formation of the initial phase of a renewed upward structure, targeting 159.59, with the prospect of a further move towards 160.00.

This scenario is technically supported by the MACD indicator, whose signal line remains above the zero level and is directed sharply upward, indicating that bullish momentum remains despite the recent correction.

On the H1 chart, USD/JPY is forming a consolidation range around 158.77. The range has currently expanded downward to 157.97.

• A breakout below this level would likely trigger a decline towards 156.60
•  A breakout to the upside would open the way for a bullish wave towards 159.59

This outlook is supported by the Stochastic Oscillator, whose signal line is positioned above the 50 level and is moving steadily upward towards 80, indicating growing bullish pressure.

Conclusion

USD/JPY remains at a critical juncture, balancing yen support from intervention risks and expectations of BoJ tightening against ongoing pressure from political uncertainty. In the short term, consolidation is likely to persist, but a breakout from the current range will define the next directional move. As long as the pair holds above key support levels, the broader bullish trend towards the 160 area remains technically valid, while a downside breakout would shift focus towards deeper corrective targets.

Disclaimer
Any forecasts contained herein are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

As the chart shows, the exchange rate rose above ¥185.00 per euro for the first time ever earlier this week. Today, however, a modest pullback is visible, with the Japanese yen strengthening against the euro.

Fundamentally, this move has been supported by a combination of factors, most notably news from Japan. According to media reports, Japan’s Finance Minister, Satsuki Katayama, said that Tokyo could carry out a joint currency market intervention with the United States to support the yen.

In addition, traders are positioning ahead of an important week, during which:

→ the Bank of Japan will announce its interest rate decision;

→ Japan’s parliament may be dissolved to pave the way for snap elections;

→ euro area PMI figures will be released.

Technical Analysis of the EUR/JPY Chart

Price action continues to form an ascending channel (shown in blue). At the same time, signs of a shift in sentiment have emerged.

At the start of the week, sentiment was bullish:

→ the price broke through a local resistance line and consolidated in the upper half of the channel;

→ it surpassed the December high and moved above the psychological level of ¥185 per euro.

Subsequently, bears took control:

→ the pair failed to hold above the 185.00 level;

→ the price fell back to the channel’s median, which failed to provide meaningful support;

→ the decline continued, with the local 183.9 level switching from support to resistance.

It is reasonable to assume that the lower boundary of the channel could limit further downside in EUR/JPY. However, this support is unlikely to hold if the Bank of Japan, potentially backed by the US, actively steps in to strengthen the yen.

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• The greenback’s primary weapon is the wide spread in interest rates.
• The yen is following the lead of the government and the Bank of Japan.

The US dollar continues its strong run in the forex market for almost a month. A combination of strong US macro statistics and hawkish Fed officials’ comments allows the greenback to dominate. In the week ending January 10th, Initial Unemployment Claims fell to 198K. In recent years, the figure has only occasionally fallen below 200K. Its 4-week average fell to the lowest in two years. This points to a stabilisation of the labour market and deprives the FOMC doves of their key trump card.

The EURUSD has been falling for 11 of the last 15 sessions and has reached its lowest since early December. According to Credit Agricole, the idea of divergence in the monetary policies of the Fed and the ECB will not be realised. The Fed will leave rates unchanged in 2026, and the wide spread with the deposit rate will become the primary weapon of the US dollar. Bank of America warns that the ECB’s dissatisfaction with inflation dynamics may force it to resume its cycle of monetary expansion. This will put pressure on the euro.
The large spread between the Fed's and ECB's key rates may remain in the markets for a long time

It seems the only hope for EURUSD bulls is Donald Trump, who dreams of lowering the federal funds rate to 1%. However, the US president has tied his own hands with a lawsuit against Jerome Powell. Now, candidates close to him for the position of Fed chairman may be rejected by the Senate due to concerns about the independence of the central bank.

The only currency performing better than the dollar recently is the yen. USDJPY gave way to fears of possible currency interventions, as hinted at by Japanese Finance Minister Satsuki Katayama. According to Bloomberg insiders, the BoJ is focusing its attention on the pro-inflationary impact of a weak yen. Although no rate hike is expected in January, further policy tightening may remain on the table. Experts do not expect an overnight rate hike before July.

Reduced geopolitical risk, supported by developments involving Venezuela and Iran, has put pressure on gold prices. The strong dollar and rising US Treasury yields are also weighing on gold. However, the precious metal’s reluctance to correct in difficult conditions speaks to its strength.

Daily Pivots: (S1) 211.76; (P) 212.54; (R1) 213.07; More...

GBP/JPY is staying in consolidations below 214.27 and intraday bias remains neutral. Downside should be contained by 210.28 support to bring another rally. Break of 214.27 will resume larger up trend to 100% projection of 184.35 to 205.30 from 199.04 at 219.99 next. Nevertheless, considering bearish divergence condition in 4H MACD, firm break of 210.28 will confirm short term topping, and turn bias to the downside for deeper pullback.

In the bigger picture, up trend from 123.94 (2020 low) is in progress. Next target is 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90. On the downside, break of 205.30 resistance turned support is needed to indicate medium term topping. Otherwise, outlook will stay bullish even in case of deep pullback.

Daily Pivots: (S1) 183.81; (P) 184.22; (R1) 184.58; More...

EUR/JPY is staying in consolidations below 185.55 and intraday bias remains neutral. Further rally is expected with 182.60 support intact. Above 185.55 will resume larger up trend to is 186.31 fibonacci level. Firm break there will pave the way to 138.2% projection of 151.06 to 173.87 from 172.24 at 189.94. However, considering bearish divergence condition in 4H MACD, firm break of 182.60 will confirm short term topping, and turn bias back to the downside for deeper pullback.

In the bigger picture, up trend from 114.42 (2020 low) is in progress and should target 61.8% projection of 124.37 (2021 low) to 175.41 (2024 high) from 154.77 (2025 low) at 186.31. Firm break there will target 78.6% projection at 194.88. Outlook will remain bullish as long as 175.41 resistance turned support holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8660; (P) 0.8669; (R1) 0.8686; More…

EUR/GBP is still bounded in range above 0.8643 and intraday bias remains neutral. Further decline is expected and decisive break of 0.8631 cluster support (38.2% retracement of 0.8221 to 0.8663 at 0.8618) will pave the way to 61.8% retracement at 0.8466. However, break of 0.8691 resistance will turn bias to the upside, for stronger rebound to 55 D EMA (now at 0.8719) first.

In the bigger picture, rise from 0.8221 medium term bottom (2024 low) is seen as a corrective move. Upside should be limited by 61.8% retracement of 0.9267 to 0.8221 at 0.8867. Sustained trading below 55 W EMA (now at 0.8622) should confirm that this corrective bounce has completed. In this case, deeper fall would be seen back to 0.8201/21 key support zone. However, decisive break of 0.8867 will suggest that EUR/GBP is already reversing whole decline from 0.9267 (2022 high). That should pave the way back to 0.9267.

Daily Pivots: (S1) 1.7268; (P) 1.7362; (R1) 1.7426; More...

EUR/AUD is still bounded in range above 1.7287 and intraday bias stays neutral. Further decline is expected with 1.7477 support turned resistance intact. Current fall is seen as the third leg of the corrective pattern from 1.8554. Below 1.7287 will target 1.7245 support, and then 1.6922 fibonacci level. Nevertheless, firm break of 1.7477 will indicate short term bottoming, and bring stronger rebound back to 55 D EMA (now at 1.7602).

In the bigger picture, the break of 55 W EMA (now at 1.7468) argues that fall from 1.8554 medium term top is already correcting whole up trend from 1.4281 (2022 low). Deeper decline is in favor to 38.2% retracement of 1.4281 to 1.8554 at 1.6922, and possibly below. Risk will stay on the downside as long as 1.8160 resistance holds, in case of strong rebound.

Daily Pivots: (S1) 0.9312; (P) 0.9320; (R1) 0.9335; More....

Intraday bias in EUR/CHF remains neutral for the moment. On the upside, break of 0.9347 will resume the rebound from 0.9268 to retest 0.9394 high. However, break of 0.9294 will bring deeper fall through 0.9268 instead.

In the bigger picture, persistent bullish convergence condition in W MACD is a medium term bullish sign. Firm break of 0.9394 resistance should bring sustained trading above 55 W EMA (now at 0.9362). That should indicate medium term bottoming at 0.9178. Further break of 0.9452 resistance will bring stronger medium term rally towards 0.9928 resistance next, even still as a corrective bounce. Nevertheless, rejection by 55 W EMA will retain bearishness for another fall through 0.9178 at a later stage.

Daily Pivots: (S1) 1.3867; (P) 1.3882; (R1) 1.3899; More...

Intraday bias in USD/CAD remains neutral as consolidations from 1.3917 is still extending. In case of another dip, downside should be contained by 1.3789 support to bring rebound. Rise from 1.3641 is seen as the third leg of the corrective pattern from 1.3538. Firm break of 1.3917 will target 1.4139 first. Break there will target 100% projection of 1.3538 to 1.4139 from 1.3641 at 1.4242.

In the bigger picture, price actions from 1.4791 are seen as a corrective pattern to the whole up trend from 1.2005 (2021 low). Deeper fall could be seen as the pattern extends, and break of 1.3538 will target 61.8% retracement of 1.2005 to 1.4791 at 1.3069. For now, medium term outlook will be neutral until there are signs that the correction has completed.

Daily Pivots: (S1) 0.6670; (P) 0.6686; (R1) 0.6699; More...

No change in AUD/USD's outlook as consolidations continue below 0.6765 short term top. Intraday bias stays neutral at this point. Further rally is in favor with 0.6659 support intact. On the upside, break of 0.6765 will resume the whole rise from 0.5913 and target 61.8% projection of 0.5913 to 0.6706 from 0.6420 at 0.6910. However, considering bearish divergence condition in 4H MACD, firm break of 0.6659 will confirm short term topping, and bring deeper correction back towards 0.6592 support.

In the bigger picture, current development argues that rise from 0.5913 (2024 low) is reversing whole down trend from 0.8006 (2021 high). Further rally should be seen to 61.8% retracement of 0.8006 to 0.5913 at 0.7206. This will remain the favored case as long as 0.6420 support holds.