USD/JPY dropped late in the North American session. Weaker U.S. equities boosted safe-haven demand for the Japanese yen and gold. The pair traded near 154.71 after hitting a daily high of 155.04. The U.S. dollar also softened after the U.S. Supreme Court ruled against IEEPA tariffs imposed by the Trump administration. The U.S. Dollar Index (DXY) fell 0.07% to 97.73.

Key Data And Policy Signals

U.S. Factory Orders for December fell 0.7% month-on-month. This reversed November’s 2.7% rise and was tied to weaker aircraft bookings. Comments from Fed Governor Christopher Waller helped slow the drop after USD/JPY slipped below 154.00. Waller said he is leaning toward further easing. However, he added that if February’s labour data is stronger than January’s, rates could stay unchanged. Upcoming U.S. releases include Conference Board Consumer Confidence and the ADP Employment Change 4-week average. Japan has no scheduled releases, but Tokyo CPI and January Industrial Production are due. On the chart, a simple moving average sits near 156.00. RSI is at 47.21. A descending trend line from 157.66 is limiting rebounds near 155.11; a break above it could open the way to 155.87. Support sits near 152.48 and 152.10. A close above the descending resistance would improve the set-up. A monthly performance table showed the Japanese yen was strongest against the British pound.

Longer Term Market Context

Earlier last year, USD/JPY briefly dipped toward 154.70. That move was driven by a short-lived flight to safety and a Supreme Court ruling that weakened the dollar. Since then, conditions have changed, and the pair has traded much higher as broader macro fundamentals have taken control. In 2025, the more hawkish tone from Fed officials, including Christopher Waller, became the dominant driver. Over the past year and into 2026, U.S. labour data has often beaten expectations. The latest January 2026 Non-Farm Payrolls report showed job growth of more than 225,000. This steady strength has reduced the chance of Fed rate cuts and has supported the dollar. In Japan, the data has not pushed the Bank of Japan to tighten policy aggressively. Traders have continued to watch Tokyo inflation. Recent figures show core CPI is still struggling to stay above the BOJ’s 2% target, at 1.8% year-over-year. This keeps the U.S.–Japan rate gap wide. For derivatives traders, volatility may be the main focus. With USD/JPY nearing multi-decade highs around 160.00, the chance of verbal or direct intervention by Japanese authorities is rising. One-month implied volatility has already increased from 8.0% to 9.5% in recent weeks. That makes long-volatility option approaches, such as straddles, more appealing if a sharp move occurs in either direction. The interest-rate differential, now above 500 basis points, still makes carry trades attractive. This trade typically means buying higher-yielding dollars and selling low-yielding yen. Traders may consider using forward contracts to lock in the positive carry. Still, tight stop-losses remain important given the higher risk of sudden policy shifts from Tokyo. Create your live VT Markets account and start trading now.

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