USDJPY is under pressure ahead of the BoJ decision

The USDJPY rate is correcting, though the currency pair remains under pressure, with the price currently at 155.50. Discover more in our analysis for 21 January 2025.

USDJPY forecast: key trading points

• The Japanese yen has strengthened for the second consecutive week, driven by market expectations of a BoJ interest rate hike
• The Bank of Japan officials have made hawkish statements, increasing confidence in monetary policy tightening
• Kazuo Ueda’s press conference is the market’s key event
• USDJPY forecast for 21 January 2025: 154.30 and 153.15

Fundamental analysis

The USDJPY rate shows signs of growth after rebounding from the 154.90 support level. Nevertheless, the Japanese yen is strengthening for the second consecutive trading week amid rising expectations of a Bank of Japan interest rate hike. This was triggered by hawkish comments from the bank’s officials, which increased market confidence in monetary policy tightening.

The Bank of Japan is expected to announce an interest rate hike on Friday, pushing short-term borrowing rates to 0.5%, the highest level since the global 2008 financial crisis.

As the rate hike is almost inevitable, the market’s attention is turning to BoJ Governor Kazuo Ueda’s press conference. Investors will closely follow his comments to gain insight into the regulator’s future plans regarding the pace and timing of interest rate hikes.

Japan’s inflation remains above the 2.0% target, with the weak yen continuing to pressure import prices. In this situation, Ueda will likely emphasise the regulator’s resolution to proceed with tightening monetary conditions to curb inflationary pressures.

USDJPY technical analysis

The USDJPY quotes have risen slightly after bouncing off the support level. However, seller pressure persists. Today’s USDJPY forecast suggests a bullish correction, with the price likely testing the channel’s upper boundary at 155.75 before falling to the key support level at 153.75. A rebound from the descending trendline on the Stochastic Oscillator will provide an additional signal for a price decline.

A breakout below the 154.30 level would confirm the bearish momentum, suggesting a decline towards 153.15. Conversely, if the price consolidates above 156.45, it wil invalidate the bearish scenario, indicating a breakout of the descending channel and paving the way for a rise to 158.15.

Summary

The Japanese yen is strengthening amid expectations of a BoJ interest rate hike, which puts pressure on the USDJPY pair. The markets’ focus is on BoJ Governor Kazuo Ueda’s comments, which may determine further prospects for the national currency rate. The USDJPY technical analysis indicates pressure from sellers despite the current correction. A breakout below the 154.30 level will confirm the bearish impulse and point to a decline towards 153.15. Conversely, price consolidation above 156.45 will invalidate the bearish scenario, increasing the price to 158.15.