USDJPY: expectations for a BoJ rate hike support the yen

The USDJPY rate is falling, with bears poised to test the 156.85 support level. More details in our analysis for 15 January 2025.

USDJPY forecast: key trading points

• BoJ Deputy Governor Ryozo Himino stated that an interest rate hike at the January meeting is under consideration
• The market estimates the likelihood of the Bank of Japan’s monetary policy tightening at the next meeting at 60% and by March at 83%
• In December 2024, Japan’s machine tool orders rose by 11.2% year-on-year
• USDJPY forecast for 15 January 2025: 158.45 and 154.35

Fundamental analysis

The USDJPY rate declines but remains within an ascending channel. Investors take into account the high likelihood of a Bank of Japan interest rate hike in the coming months. The market estimates the odds of such a decision at the upcoming meeting at 60%, while the probability of a rate hike by March is 83%. According to today’s USDJPY forecast, these expectations may strengthen the position of the Japanese yen.

Deputy Governor Ryozo Himino noted that the regulator will likely consider a rate hike at the January meeting scheduled for next week. He emphasised that domestic and external risks persist while price movements and inflation expectations meet the BoJ forecasts.

Meanwhile, Japan’s machine tool orders rose by 11.2% year-on-year in December 2024, reaching 141,259 million JPY. This result markedly outpaces a 3% growth in October and is well above analysts’ expectations. The positive dynamics have persisted for the third consecutive month, driven by rising domestic demand and increased foreign orders.

USDJPY technical analysis

The USDJPY quotes are declining, forming a Wedge reversal pattern. Today’s USDJPY forecast suggests that the price could attempt to test the 158.45 resistance level before falling to 154.35. A bearish divergence on the Stochastic Oscillator provides an additional signal for a downward movement.

This scenario will be confirmed by a breakout below the lower boundary of the Wedge pattern, with the price securing below 156.95. Conversely, price consolidation above 158.85 will invalidate the bearish scenario, paving the way for growth to 160.25.

Summary

The USDJPY rate is declining, driven by expectations for a BoJ interest rate hike, which supports the yen’s strengthening. Steady growth in machine tool orders points to Japan’s sustainable economic recovery. The USDJPY technical analysis suggests a potential test of the 158.45 level, followed by a reversal and a decline to 154.35. A breakout below the lower boundary of the Wedge pattern, with the price securing below 156.95, will confirm the downside scenario. Conversely, consolidation above 158.85 will invalidate the bearish option and open the way for growth to 160.25.