The USD/JPY exchange rate is losing momentum after recent highs, potentially easing the likelihood of currency intervention. The rally following the U.S. election appears to be unraveling, and the pair has dropped toward the weekly low of 153.28, after failing to sustain gains near the monthly high of 153.86.

This weakness in USD/JPY coincides with expectations for lower interest rates in the U.S., as suggested by Federal Reserve Governor Lisa Cook. The Fed has maintained that the recent election will not impact its near-term policy, adding to the headwinds for the U.S. dollar ahead of the central bank’s final meeting for 2024.

Market Outlook for USD/JPY

USD/JPY could continue to consolidate for the remainder of the month as the Federal Reserve signals a shift toward a neutral policy stance. However, the pair may also attempt to recover from its recent losses, particularly as the Bank of Japan (BoJ) shows little inclination to move toward a rate-hike cycle.

Technical indicators suggest key levels to watch in the coming days. A failure to defend the monthly low of 151.29 could lead to a further drop toward the 148.70–150.30 zone, a critical area based on Fibonacci retracement and extension levels. Conversely, a sustained move above 153.80 and a potential close above 156.50 could bring higher targets into focus, including the 1990 high of 160.40 and the yearly high of 161.95.

Factors to Watch

The Fed’s policy decisions and commentary at its upcoming meeting will play a key role in shaping the direction of USD/JPY. Meanwhile, the BoJ’s commitment to maintaining an accommodative monetary policy could continue to limit significant downside for the pair.

With ongoing uncertainty in global markets and shifting monetary policies in the U.S. and Japan, USD/JPY is likely to remain volatile in the short term. Traders will closely monitor key levels and economic announcements to gauge the pair’s next move.