🔍 Fundamental Overview
USD/JPY opens the final week of 2025 near 156.00, pressured by a combination of Japanese policy tightening expectations, concerns over possible FX intervention, and thin year end liquidity amplifying swings.
🇯🇵 Japan
• BoJ Policy Outlook:
The December BoJ meeting revealed discussion of further tightening, even after the recent rate hike to a multi year high. Policymakers noted that policy remains far from neutral and may need structural adjustment to get ahead of inflation risks.
• Intervention Risk:
Finance Minister Katayama reiterated Japan’s readiness to act against excessive yen fluctuations, reinforcing market caution and supporting the yen.
• Yield & Liquidity Conditions:
Year end liquidity is thin, increasing sensitivity to yield moves and risk sentiment. USDJPY remains driven by yield spreads, but stretched positioning creates room for corrective dips.
🇺🇸 United States
• Policy Divergence:
U.S. yields remain elevated relative to Japan, keeping the broader directional bias supportive for USD/JPY, but downside pressures appear short term as markets digest month end flows.
• Dollar Momentum:
The USD has been broadly softer into late December due to a repricing of the Fed’s 2026 outlook and cooling sentiment across USD pairs, putting USDJPY temporarily on the defensive.

📊 Technical Analysis
USDJPY shows a corrective pullback, with bears testing support zones while the medium term bullish structure remains intact.
Support Levels
• 155.55 — key support for continuation of bearish correction.
• 155.80 — important near term structural support.
• 154.90 — deeper corrective target if bearish momentum strengthens.
Resistance Levels
• 156.50 — near term balance zone / pivot.
• 157.00 – 157.20 — key resistance band; bullish breakout zone.
• 158.00 — major resistance; break may resume medium term bullish trend.
Indicators
• Momentum: RSI showing short term bearish exhaustion after overbought conditions; Alligator indicator turned downward confirming corrective phase.
• Market Structure: Consolidation with near term bearish tilt; medium term still bullish unless 154.90 breaks.

📈 Trading Scenarios
✅ Bullish Setup (Buy on dips)
• Entry: 155.80 – 156.00
• Targets:
➤ 156.90 – 157.20 (initial)
➤ 158.00 (extension if liquidity improves)
• Stop Loss: Below 155.40
• Catalysts:
o Rebound in U.S. yields
o Reduced intervention fears
o Return of risk on flows
• Basis: Year end dips historically temporary; buyers likely defend the 155.80–156.00 zone.

❌ Bearish Setup (Sell rallies)
• Entry: 157.00 – 157.20
• Targets:
➤ 156.10 – 155.90
➤ 155.55 (extended)
• Stop Loss: Above 157.60
• Catalysts:
o Strong BoJ tightening narrative
o Verbal intervention from MoF
o Weak U.S. macro surprises
• Basis: Momentum shows exhaustion at highs; sellers consistently defend 157+.