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21.01.202512:37 Forex Analyse & Reviews: USD/JPY: Analysis and Forecast

Relevance up to 05:00 UTC--5

Exchange Rates 21.01.2025 analysis

The current position of the Japanese yen reflects a complex balance between the positive sentiment in equity markets and expectations of interest rate hikes by the Bank of Japan.

The Japanese yen is navigating a delicate equilibrium as rising demand in equity markets undermines the appeal of safe-haven assets like the yen. However, expectations of a Bank of Japan interest rate hike could limit the yen's decline, providing additional incentives for investors. Concerns over trade wars, particularly following recent comments from Donald Trump, may also refocus attention on risks, supporting the yen's status as a safe-haven currency.

Traders seeking optimal trading opportunities may benefit from awaiting the outcome of the Bank of Japan's crucial two-day monetary policy meeting, scheduled to begin on Thursday and conclude on Friday.

The USD/JPY pair remains resilient, trading below the 155.00 level, successfully defending this support. Before confirming a continuation of the pair's recent decline from its multi-month high, it would be prudent to await a convincing break below this support level. A sustained move below 155.00 could pave the way for the pair to test interim support at 154.60, with the next target at the psychological level of 154.00, and potentially lower.

Exchange Rates 21.01.2025 analysis

On the other hand, the 156.25 level—representing the Asian session high—serves as an immediate barrier. A breakout above this level, particularly around 156.50, could allow USD/JPY to reclaim the 157.00 level. Further recovery momentum might extend toward the 157.40 level, with a potential move toward the key 158.00 level. Sustained strength beyond this point would set the stage for a retest of the multi-month high at 159.00, previously reached on January 10.

The USD/JPY pair is at a critical juncture, with downward risks constrained by expectations of Bank of Japan policy adjustments and upward potential driven by equity market sentiment. Traders should monitor key support and resistance levels, alongside the outcomes of the Bank of Japan's policy meeting, for clear directional signals.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Irina Yanina,
Analytical expert of InstaSpot
© 2007-2025
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