Yen surges as BoJ hike bets jump; USD/JPY breaks below 155 ahead of FOMC
The yen rallied and USD/JPY slid through the 155 handle as traders priced a sharper policy pivot from the Bank of Japan and grew more confident the Fed will ease in December, setting up a pivotal week for FX volatility.
Macro drivers: Fed easing bets vs. BoJ’s shifting stance
The dollar weakened broadly after New York Fed President John Williams signaled support for a December rate cut, and a run of soft U.S. data reinforced the dovish turn. Market-implied odds for a December cut have climbed to about 86%, effectively making it a baseline scenario for many desks. Thursday’s U.S. weekly jobless claims are the last notable data point before Wednesday’s FOMC decision; barring a major surprise, they are unlikely to derail expectations.
On the Japan side, the yen extended gains following comments from BoJ Governor Kazuo Ueda earlier in the week that kept the door ajar to further normalization. A Reuters report, citing government sources, said the BoJ is likely to raise rates later this month, sending market pricing for a December move to roughly 76%. The repricing narrowed U.S.–Japan rate differentials at the margin and pressured dollar-yen lower.
Market snapshot
- Dollar weakens as traders price a high probability of a December Fed cut (~86%).
- Reuters report suggests BoJ may hike this month; market odds jump to ~76%.
- USD/JPY breaks below 155.00; bears eye 153.50 support on rising yen momentum.
- U.S. jobless claims in focus before next week’s FOMC; U-Mich sentiment caps the week.
- FX volatility likely to rise into FOMC, followed by NFP and CPI as the next macro catalysts.
USD/JPY technical picture
Daily timeframe
USD/JPY has broken below a multi-week rising trendline, opening a path toward the 153.50 support zone. Momentum favors sellers following the trendline breach, with clean air toward that support unless policy headlines intervene. Dip-buyers may look to 153.50 for potential basing, but the risk/reward skews toward patience until price action stabilizes.
4-hour timeframe
A descending minor trendline is guiding the pullback. Sellers are likely to fade rallies into that line, managing risk just above it while targeting the 153.50 area. A sustained break above the descending trendline would be an early signal that corrective pressure is easing, putting 158.85 back in view as the next topside level.
1-hour timeframe
The decisive break beneath the 155.00 psychological level has accelerated downside momentum, with bears retaining control toward 153.50. Intraday rebounds may struggle below former support-turned-resistance near 155.00 unless macro catalysts flip the narrative.
Trading context and sentiment
With Fed cuts increasingly baked in, U.S. front-end yields have eased and the dollar’s carry appeal has slipped. The more consequential shift is in Japan: even a modest BoJ hike would reprice terminal rate assumptions, complicating yen-funded carry trades and supporting JPY on pullbacks. That said, liquidity conditions around central bank decision days can amplify moves in both directions, and authorities remain sensitive to disorderly FX swings. Near-term, traders should expect elevated USD/JPY volatility into the FOMC and subsequent NFP/CPI sequence.
What’s next
- U.S. Initial Jobless Claims (today): last notable print before the FOMC.
- University of Michigan Consumer Sentiment (Friday): inflation expectations watched.
- FOMC decision (Wednesday): forward guidance and dot-plot nuances matter for USD rates.
- NFP and CPI (post-FOMC): key tests of the disinflation and labor-cooling narrative.
FAQ
Why is USD/JPY falling now?
The pair is reacting to a two-pronged macro shift: markets have priced an elevated chance of a December Fed rate cut, weakening the dollar, while expectations for a Bank of Japan hike later this month have strengthened the yen. Together, narrower rate differentials are pressuring USD/JPY lower.
How important are U.S. jobless claims for the FOMC decision?
They matter at the margins, but with a December cut already heavily priced, a routine claims print is unlikely to change the Fed’s near-term path. A sharp upside surprise could reinforce dovish expectations; a downside surprise would need to be significant to sway pricing.
What levels are critical for USD/JPY in the short term?
On the downside, 153.50 is the next notable support. On the upside, 155.00 is immediate resistance after being broken, and 158.85 is a key level if bulls regain control. A sustained move back above the minor descending trendline on the 4-hour chart would signal fading bearish momentum.
What would a BoJ rate hike mean for the yen?
Even a small BoJ hike would signal continued normalization, reducing the policy divergence that has weighed on the yen. It would likely curb yen-funded carry trades and support a stronger JPY over time, especially if U.S. yields continue to soften.
What should traders watch after the FOMC?
Nonfarm payrolls and CPI will test the durability of the disinflation trend and labor-market cooling. Softer prints would validate Fed easing and keep the dollar under pressure; hotter data could lift U.S. yields and trigger a USD/JPY rebound. As always, watch liquidity and positioning into these releases, BPayNews notes.
