The USD/JPY pair continues its bullish momentum, climbing to five-month highs following a favorable response to the Federal Open Market Committee (FOMC) rate decision in December. The pair is now approaching a critical longer-term resistance level near the 160.00 handle.

Key Highlights for USD/JPY

• USD/JPY surged after the FOMC’s less-dovish outlook for 2025, reinforcing bullish sentiment.
• The pair has maintained upward momentum, with higher highs and higher lows characterizing early 2025 price action.
• A prior resistance zone around 156.67-157.17 has now flipped into support, providing a solid foundation for further gains.

Technical Outlook: Daily Chart

USD/JPY bulls have been steadily recovering losses from the July-August sell-off, with December marking another strong performance. During the FOMC rate decision, the pair broke above the 156.67-157.17 Fibonacci resistance zone to hit fresh five-month highs.

Since then, price action has consolidated, but the broader trend remains bullish, supported by higher highs and lows. The former resistance zone at 156.67-157.17 now serves as a critical support area.

Shorter-Term Analysis: Four-Hour Chart

On the four-hour chart, the uptrend appears to be slowing slightly, but the pair retains a topside bias. Recent swing lows at 156.02 and 156.24 indicate higher-low support potential, reinforcing the strength of the 156.67-157.17 zone as a key base for the bulls.

Bigger Picture: Major Resistance Ahead

Looking at the bigger picture, the 160.00 level represents a significant resistance area with historical importance. This level was defended by the Bank of Japan in late April last year and saw similar activity in late June and early July before another intervention.

If USD/JPY bulls push through this zone, it could signal further upside potential. However, a failure to break above 160.00 might trigger a reversal, inviting mean-reversion strategies. This scenario could align with broader U.S. dollar themes, particularly if upcoming economic data, including Non-Farm Payrolls (NFP) and Consumer Price Index (CPI) releases, show any signs of weakness.

Weekly Chart and Future Outlook

The weekly chart underscores the importance of the 160.00 resistance zone. Upcoming data releases, such as NFP and CPI, will play a crucial role in shaping market sentiment. A strong USD could fuel further gains, while softer data might prompt a pullback in USD/JPY.

As USD/JPY approaches these pivotal levels, traders should keep an eye on both technical signals and macroeconomic developments to navigate potential market moves.