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A Break Above 160.00 Is Inevitable
Forex
Summary:
Recently, dovish comments from several Bank of Japan officials have significantly cooled expectations for a rate hike. Concurrently, unfavorable remarks by the Japanese Prime Minister regarding Sino-Japanese relations may exert downward pressure on the yen.
Buy
TradingUSDJPY
EXP
154.997
Entry Price
160.100
TP
153.500
SL
155.303 -0.211 -0.14%
0
Point
Flat
153.500
SL
CLOSING
154.997
Entry Price
160.100
TP
Fundamentals
Several Bank of Japan officials have emphasized in recent public remarks that while inflation in Japan has rebounded, it remains far from achieving the sustainable inflation target underpinned by wage growth. Therefore, there is no need to rush into a new tightening cycle. Market expectations for further interest rate hikes in Japan have rapidly cooled, widening the interest rate differential between Japan and the United States and reinforcing the dollar's dominance in the interest rate structure. With the Federal Reserve maintaining high interest rates, or at least adopting a cautious stance on rate cuts, the dollar continues to attract carry trade capital, while the yen remains weak due to a lack of yield support.
Meanwhile, new uncertainties in Japan's domestic political landscape are further depressing the yen's exchange rate. Japan's newly appointed Prime Minister Takaichi Sanae has recently made a series of politically hardline and even confrontational remarks on China-related issues, raising new risks of tension in Sino-Japanese relations. As China stands as one of Japan's most important trading partners, any escalation of political friction could impact Japan's exports, supply chain stability, and corporate confidence, thereby weakening the country's economic outlook. Markets widely fear that if such political stances persist or intensify, Japan may face greater external trade pressures in the future. Rising political risks have not only failed to trigger the traditional "safe-haven buying of the yen" effect seen in conventional geopolitical conflicts but have instead elevated the yen's risk premium due to uncertainties over their economic impact, thereby weakening the momentum of capital inflows into Japan.
Furthermore, the shift in political focus has also led the Ministry of Finance to adopt a relatively milder stance on currency intervention. Even as the USD/JPY exchange rate approaches the sensitive range from 155 to 160 once again, the government's warning signals remain weaker than before. This absence of strong verbal intervention has allowed the market to push the USD/JPY higher with greater confidence.
Technical Analysis
On the weekly chart, the triangular convergence range of the USD/JPY has been broken upward, indicating that the overall market sentiment is trending towards an upward movement. The first target is expected to test the level of 160.00, and there is even a possibility of reaching the historical high since 1990.
On the daily chart, the recent candlestick trend of the USD/JPY has consistently been above the 20-day moving average. The short-term trend shows a clear upward trend. Meanwhile, the Relative Strength Index (RSI) is in a neutral-to-strong area and has not yet entered the overbought zone, indicating that the upward trend will continue in the short term.
Trading Recommendations
Trading Direction: Buy
Entry Price: 155.00
Target Price: 160.10
Stop Loss: 153.50
Validity Until: 2025-12-2 23:00:00
Support: 154.80, 153.61
Resistance Point: 158.86, 160.0
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