On Monday, the USD/JPY pair fell 0.7%, slipping back below the 157.00 level as markets adjusted ahead of midweek New Year’s holiday closures. With the year-end holiday session in full swing, trading volumes remain notably subdued across broad markets.
Bank of Japan’s Struggle with Yen Weakness
The Bank of Japan (BoJ) continues its uphill battle to counter the Japanese Yen’s two-year decline, deploying nearly every policy tool except a significant interest rate hike. After abandoning its negative interest rate policy in March 2024, the BoJ cautiously allowed rates to rise to 0.25% before pausing further adjustments. Despite this shift, markets remain uncertain about what economic conditions might prompt the BoJ to resume rate increases. The central bank has reiterated its commitment to a data-dependent stance for future policy decisions.
US and Japanese Markets in Holiday Mode
Both Japanese and US markets are experiencing reduced activity as they approach the New Year’s midweek holiday. Looking ahead, the first significant US economic release of 2025 will be the ISM Manufacturing PMI data, scheduled for Friday, leaving limited catalysts for the USD/JPY pair in the interim.
USD/JPY Technical Analysis
Despite Monday’s decline, USD/JPY maintains its position in bullish territory, trading near 157.00 after briefly testing levels above 158.00. The pair previously rebounded from the 200-day Exponential Moving Average (EMA) near 150.00, rallying by 6.35% from its recent low.
For buyers, the key challenge will be sustaining the Greenback above the 50-day EMA, which is currently rising near 153.00. A breach below this level could lead to a deeper retracement toward the 200-day EMA, now trending upward above 151.00.
As the holiday lull subsides, traders will be closely monitoring technical levels and upcoming US economic data for direction.
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