The USD/JPY pair fell to its lowest level in a month during today’s Asian session, dropping below 155.5 yen per US dollar for the first time since 19th December.

As Reuters reports:
→ The yen’s strengthening was driven by hawkish comments from Bank of Japan (BOJ) Governor Kazuo Ueda, which prompted markets to bet on a potential interest rate hike next week.
→ A significant majority of surveyed economists anticipate the BOJ will raise rates at one of its two meetings this quarter, with most favouring a January hike.

The BOJ’s decision on rates may depend on market stability following Donald Trump’s return to the White House next Monday. His inauguration speech will be closely watched by policymakers worldwide to gauge his likely political direction.

Technical analysis of the USD/JPY chart shows:
→ The price has struggled to hold above the 158 yen-per-dollar level, which can be considered a critical barrier where bulls are unwilling to take on the risk associated with potential rate hikes.
→ The 157 level has been broken, transitioning from support to resistance (as indicated by the arrows).

Bulls might find support at the lower boundary of the ascending channel (marked in blue), which has been in place since November last year. However, given strong fundamental factors, such as the US presidential inauguration and BOJ rate decisions, USD/JPY is likely to experience spikes in volatility that could significantly shift the supply-demand balance—not just in the short term.

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