27.01.202513:25 Forex Analysis & Reviews: USD/JPY: The Japanese Yen Takes the Lead

The Japanese yen continues to gain support from the Bank of Japan's hawkish rate hike on Friday.

Market Dynamics

The currency market is witnessing an intriguing interaction between the Japanese yen and the U.S. dollar, particularly in light of recent developments. Despite short-term fluctuations within a specific range, the USD/JPY pair is finding support due to several factors.

1. White House Agreement with ColombiaThe announcement of an agreement between the White House and Colombia regarding undocumented migrants has impacted the currency markets. While this event has social implications tied to uncertainty surrounding U.S. immigration policy, it has exerted pressure on the yen.
2. Investor Concerns Over Trump's Trade PoliciesInvestor concerns about President Trump's trade policies continue to weigh on the dollar, limiting its upward potential.
3. Support for the YenThe yen is bolstered by the Bank of Japan's hawkish stance and speculation about two potential rate cuts by the Federal Reserve this year. This narrowing interest rate differential between the U.S. and Japan further strengthens the yen, indicating its potential resilience in the coming days.

Technical Analysis

From a technical standpoint, the USD/JPY pair is finding support near the lower boundary of a multi-month ascending channel, currently situated around the 155.25 level. Below this level lies the psychological threshold of 155.00 and the support zone at 154.80–154.75, near the 50-day SMA. A decisive break below this support could serve as a new trigger for bearish momentum.

With the RSI (Relative Strength Index) on the daily chart just beginning to show negative momentum, the USD/JPY pair could accelerate its decline toward the 154.00 level, followed by 153.30 and eventually the next psychological level of 153.00.

This technical and fundamental backdrop suggests potential continued pressure on the pair, making it a focal point for traders monitoring yen strength and U.S. dollar weakness.