The US Dollar climbed against the Japanese Yen on Monday, nearing the 155.00 level. This rise is due to low expectations for rate cuts by the Federal Reserve and pressure on the Bank of Japan to keep interest rates steady in December, especially amid increasing tensions between Japan and China. Traders are remaining cautious as they wait for delayed US economic data, which is helping the US Dollar stay strong against other major currencies. The USD/JPY chart shows an ending wedge pattern, hinting at a weakening bullish trend that may lead to a price correction.

Key Resistance and Support Levels

Resistance is found at 155.00 and 155.15, with further targets at 155.65, based on the 127.2% Fibonacci extension. Support is around 154.00, and if this level is broken, it could indicate a downward trend. The value of the Japanese Yen is influenced by the state of the Japanese economy, policies from the Bank of Japan, yield differences, and global market sentiment. The Bank’s past ultra-loose monetary policy has weakened the Yen, but recent adjustments might provide some support. The yield gap between US and Japanese bonds, shaped by the BoJ’s policies, typically favors the US Dollar. Additionally, the Yen is viewed as a safe haven, which might strengthen it during times of market uncertainty. As the US Dollar gains strength against the Japanese Yen, it approaches the 155.00 mark. This trend is supported by expectations that the Federal Reserve will keep interest rates steady longer than expected. Meanwhile, the Bank of Japan faces pressure to maintain its policy in December, which continues to weaken the Yen. Recent data supports this trend; the US core CPI from November 13, 2025, remains high at 3.1%, making near-term Fed rate cuts unlikely. At the same time, Japan’s economy contracted slightly by 0.1% in the third quarter, complicating the Bank of Japan’s ability to tighten its policy.

Technical Warning Signs Ahead

However, technical indicators show a warning. An ending wedge pattern is forming, indicating that the upward momentum may be slowing. This pattern often signals a potential correction or price drop ahead. For derivative traders, this could be a signal to consider downside protection or bearish positions. Watching the 154.00 level closely is crucial as it serves as key support. Buying put options with strike prices below this level could be a strategic way to profit from a possible downturn. Conversely, if the price breaks above the 155.15 resistance, the rally could extend to 155.65. Using limited-risk call options might capture this potential short-term gain. Given the narrowing price range, we might also see a sharp move in either direction, making volatility strategies like straddles appealing. We should also be aware of the risk of government intervention as we approach these multi-decade highs. We saw sudden reversals in late 2022 when the Ministry of Finance intervened to strengthen the yen. This history suggests that aggressively holding long positions at these levels carries considerable risk. Create your live VT Markets account and start trading now.

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