18.12.202414:27 Forex Analysis & Reviews: USD/JPY: Analysis and Forecast

During the Asian session, the Japanese yen managed to modestly recover its earlier losses.However, sustained growth of the Far East currency is uncertain, especially as the Bank of Japan is expected to maintain its interest rates at current levels later this week. Additionally, the recent rise in US Treasury yields, fueled by expectations that the Federal Reserve will take a more cautious stance on rate cuts, is likely to limit the yen's appreciation.

Persistent geopolitical risks, fears of a trade war, and cautious market sentiment continue to provide support for the safe-haven Japanese currency.

Traders are advised to refrain from opening aggressive directional positions ahead of key central bank events. These include the outcomes of the highly anticipated two-day FOMC meeting to be released today and the Bank of Japan's decision on Thursday. Nonetheless, the fundamental backdrop remains tilted in favor of yen bears.

The emergence of some buying interest near the recent breakout above the critical 200-day Simple Moving Average (SMA) bodes well for bulls. Moreover, oscillators on the daily chart are gaining positive momentum and remain far from overbought territory, indicating that the path of least resistance for USD/JPY lies to the upside.

Further upward movement, however, will face resistance near the 154.00 psychological level, followed by the 154.45–154.50 level, which marks a three-week high reached on Monday. A sustained move beyond this area could pave the way for a recovery toward the 155.00 psychological level. The bullish momentum may extend further to the next significant hurdle around 155.50, heading toward another key resistance at 156.00 and the supply zone near 156.25.

On the other hand, the 153.15 level, representing the overnight low during the US session, provides immediate support against a pullback. A further decline below the 153.00 psychological level could pull USD/JPY back toward the 200-day SMA support near 152.15. Failure to defend these levels would shift the bias in favor of bears, making prices vulnerable to an accelerated decline toward the 151.00 level, with a potential test of the 150.00 psychological threshold.