USD/JPY Stays Under Pressure as the New Week Begins: Key Technical Levels to Watch
Key Takeaways
- •USD/JPY declined 0.4% to around 155.60 after whipsawing between 156.27 and 155.60 in the latest session.
- •Price action remains below the 100-day and 200-day moving averages, pointing to a bearish technical bias, while support near 155.50 is holding.
- •A break below the 155.00 psychological level would target the January-February lows around 152.00-25, whereas a hold could allow dip buyers to attempt a rebound.
- •The yen has been pressured by the wide interest-rate gap between a restrictive Federal Reserve and a Bank of Japan that only ended negative rates in March 2024 and has hiked cautiously since.
- •Japanese authorities previously intervened in currency markets in 2022 and mid-2024 when USD/JPY traded near 160, and Friday's US CPI report is the key risk event ahead of next week's Fed decision.
USD/JPY is down 0.4% to around 155.60 today, with the currency pair once again looking heavy as the new trading week gets underway.
The sharp decline from last week remains fresh in traders' minds, despite some dip-buying on Friday following the US jobs report. The non-farm payrolls data came in hot, initially boosting the dollar, but that bid was quickly undone. USD/JPY whipsawed from a high of 156.75 to a low of 155.35 in roughly half an hour before a volatile close to the week.
The new week has brought more of the same. The pair initially tested waters above 156.00, with the session high reaching 156.27, before a sudden slump in the past hour or so sent it down to a low of 155.60.
So, what is the current read on USD/JPY?
Downside momentum remains largely intact following last week's drop. Technical indications point to a more bearish bias, with price action holding well below both the 100-day (red line) and 200-day (blue line) moving averages. However, dip buyers have not thrown in the towel just yet.
Key daily support from the end-April to early-May lows near 155.50 is still holding. Beyond that, the key psychological support level sits closer to 155.00, and as things stand, that is where more bids are likely to be layered as well.
The broader backdrop matters here. USD/JPY has been driven for much of the past two years by the wide interest-rate gap between a still-restrictive Federal Reserve and the Bank of Japan, which only ended its negative-rate policy in March 2024 and has raised rates only gradually since. That differential has kept the yen under persistent pressure, and levels in the mid-150s sit squarely in the zone where Japanese authorities have previously voiced concern about excessive moves — Japan intervened in currency markets in 2022 and again in mid-2024 when USD/JPY traded near 160.
Whether last week's move reflected actual intervention or yen shorts and speculators briefly bailing out, the line on the charts is clear.
The key risk now is a break below the 155.00 level. If the line holds, dip buyers will stay in with a chance of working towards a rebound. But a break below would give sellers fresh legs to keep the downside run going, with the next key downside target at the January and February lows closer to 152.00-25.
As for key risk events this week, none is bigger than the US CPI report on Friday. That will be the ultimate test for markets ahead of the Fed decision next week. On the other side of the pair, any further signals from the Bank of Japan on the pace of additional rate hikes remain a running variable for yen sentiment, with BOJ officials having reiterated a cautious, data-dependent approach in recent communications.
In the meantime, the focus for USD/JPY rests on the battle around the 155.00 mark.
