The USD/JPY is currently in a consolidation phase as markets expect a 25bps interest rate hike from the BOJ on December 19. The pair is trading around 155.98, with short-term support between 155.10 and 153.90. A significant recovery in JPY could depend on clearer direction from the BOJ, fiscal discipline, and a weaker USD. Daily charts show mild bearish trends with some easing in the decline of the RSI. The focus is on the upcoming BOJ meeting, where traders are looking for insights into 2026 plans, beyond the December decision. Support levels are at 155.10, 154.40, and 153.90, while resistance levels are at 156, 157, and 158.87. For JPY to strengthen substantially, stronger guidance from the BOJ, fiscal caution, and a softer USD are essential.

Current Trading Overview

As of today, December 12, 2025, the USD/JPY pair is trading quietly at around 155.98. This calmness is due to the market’s full expectation that the Bank of Japan will raise interest rates by 0.25% at their meeting on December 19. Since this move is widely anticipated, the announcement is unlikely to surprise anyone. The real focus for traders is not the rate hike itself, but what the BOJ reveals about its plans for 2026. Japan’s core inflation has stubbornly stayed above 2.5% for the last six months, so we’re watching for any signals of a quicker pace of rate hikes next year. A hawkish tone from the BOJ could significantly boost the yen. For derivative traders, implied volatility on one-week options is high, but actual price movement may be limited until after the meeting. It might be wise to consider strategies that take advantage of this pre-meeting calm, as the pair seems stable between the support at 155.10 and resistance at 156.00. Be ready for a sharp move based on forward guidance rather than just the rate decision itself.

Factors Affecting Yen Recovery

A meaningful recovery for the yen depends heavily on a weaker US dollar. Recent US inflation data has dipped to 2.3%, aligning closer to the Federal Reserve’s goal and raising expectations for Fed rate cuts in mid-2026. This trend supports a lower USD/JPY rate, but it unfolds slowly. Historically, changes in BOJ policy without fiscal responsibility from the government have had a limited effect on the currency. Therefore, we believe sustained yen strength will require the government to indicate controlled spending in its next budget. Without this, even a more aggressive BOJ might struggle to push USD/JPY below the key 153.90 support level. Traders should leverage technical levels to set up their options strategies for the coming weeks. The range between 153.90 and 155.10 is a critical support zone to watch for determining strike prices on put options. On the upside, resistance near the 21-day moving average at 156.00 provides a clear target for short-term call strategies. Create your live VT Markets account and start trading now.

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