USD/JPY hovered near the 160.00 handle on Thursday after probing early September highs over the previous two sessions. Although the yen has attempted to reclaim ground, the pair remains anchored above 159.50, suggesting a sustained pullback is premature.
The yen draws support from mounting expectations of a Bank of Japan rate hike in December. Preliminary Corporate Goods Price Index (CGPI) data revealed wholesale inflation rose 0.7% month-on-month in October—the first gain in three months—pushing the annual rate to 7.1% from 6.8%. Further bolstering the currency, Japan’s top currency diplomat, Atsushi Mimura, cautioned against excessive exchange-rate volatility, reviving the threat of direct intervention.
Conversely, the U.S. dollar holds near highs last visited in April 2025. Markets are increasingly discounting another Federal Reserve rate increase, with a 50-basis-point move in December not ruled out. Anticipation of tighter Fed policy, combined with a geopolitical risk premium stemming from U.S.-Iran tensions, continues to underpin the greenback.
While former President Trump has signaled further strikes on Iran are unlikely for the moment, buoying hopes for a diplomatic resolution, ongoing attacks on shipping-linked facilities near the Strait of Hormuz highlight that a peaceful outcome remains uncertain.
Consequently, the fundamental landscape for USD/JPY remains mixed: the yen benefits from BoJ tightening bets and intervention risks, while the dollar finds footing in hawkish Fed expectations and geopolitical uncertainty.
Technical Analysis
On the H4 chart, the bullish structure remains intact. Following a break above the 158.81 region, the pair accelerated toward 159.92 before entering a consolidation phase. Immediate resistance sits near 159.96; a decisive break would pave the way for an advance toward 160.36. However, a corrective pullback to 159.00 is plausible before any further upside resumption.
The MACD indicator reinforces the constructive medium-term bias. The histogram remains above zero with the signal line sloping upward, though the most recent bar has contracted, signaling fading momentum. As such, an immediate bullish acceleration lacks confirmation. Maintaining ground above 159.00 keeps the primary bullish scenario valid.
On the H1 timeframe, the pair is consolidating after a sharp advance. The 159.79 level serves as the nearest upside reference, though the recent range extends higher. A push toward 159.96 represents the first step toward the 160.36 target. The Stochastic oscillator holds above 50 but has turned lower from near the 80 threshold, suggesting a near-term dip may precede the next upward attempt.
For the session ahead, a test of 159.96 remains the baseline case. A sustained break above this barrier would raise the odds of a run toward 160.36. Failure to clear resistance keeps the door open for a retreat to 159.00, while a break below that level would shift focus to 158.81 and undermine the bullish thesis. Range-bound action with alternating advances and pullbacks is likely until a decisive breakout occurs.
Conclusion
USD/JPY continues to trade around the 160.00 pivot, with the yen underpinned by expectations of a December BoJ rate hike, accelerating wholesale inflation, and verbal intervention warnings from Tokyo. The dollar, meanwhile, draws strength from the prospect of tighter Fed policy—including a potential 50-basis-point December move—and persistent geopolitical uncertainty linked to the U.S.-Iran standoff. Technically, the pair maintains a bullish structure, targeting 160.36 on a confirmed break above 159.96 resistance. A corrective dip to 159.00 is possible before the uptrend resumes, though a breach of that support would bring 158.81 into play and challenge the bullish outlook. Near-term price action will depend on whether buyers can overcome 159.96 or if intervention fears and corrective pressure force a deeper pullback.
