USD/JPY pulled back from the 156.80–156.85 area, a two-week high, and slipped to around 155.75 during Thursday’s Asian session. This ended a two-day rally after sellers stepped in.
The Japanese Yen strengthened following hawkish comments from Bank of Japan officials, which reinforced expectations of more policy tightening. The Yen also found support from trade uncertainty and geopolitical risks ahead of US-Iran nuclear talks, along with mild US Dollar softness.
Technical Support In Focus
The decline paused near 155.75. This level is where the 200-period simple moving average on the 4-hour chart aligns with the 23.6% Fibonacci retracement of the 152.34–156.85 move. A clean break below this area could lead to more downside.
The next supports are the 38.2% Fibonacci retracement at 155.15, followed by the 50.0% level at 154.60. If the sell-off continues, the 61.8% retracement at 154.06 could come into view.
The RSI is near 55 after failing to hold close to 70. The MACD line is just above the signal line near zero, suggesting weak directional momentum.
The Bank of Japan targets inflation near 2%. It introduced QQE in 2013, added negative rates and yield control in 2016, and raised rates in March 2024.
Shift In Macro Backdrop
Back in 2025, USD/JPY repeatedly tested 155.75, which was a key support zone at the time. Today, the picture looks very different. The US-Japan interest rate gap has narrowed sharply, and market conditions have changed as the Bank of Japan continued to normalize policy.
The BoJ’s shift began with its first rate hike in March 2024 and has remained a major driver. Since then, it has made a few more small moves in response to domestic inflation, which has stayed above the 2% target for most of the past 18 months. As of January 2026, Japan’s core inflation was 2.3%, supporting the central bank’s tighter stance.
On the US side, the Federal Reserve has been easing policy as inflation cooled. US core inflation is now closer to 2.5%, well below the levels seen in 2024 and 2025. This has given the Fed room to cut rates several times. As a result, the policy gap has flipped, adding steady downside pressure on the dollar versus the yen.
For traders, this backdrop makes aggressive USD/JPY bullish bets more risky. Consider positions that benefit from further yen strength, such as buying JPY calls or USD puts. Another approach is selling out-of-the-money USD/JPY call spreads to generate income while keeping the view that upside may now be limited.
The main technical level to watch is the 200-day moving average, near 144.50. A decisive break below it could trigger another wave of selling and bring the 140.00 psychological level into focus. A strong rebound may be hard to sustain as long as the narrowing rate differential story remains in place.
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