The USD/JPY exchange rate has fallen to a fresh monthly low of 150.46, reversing gains made following the U.S. presidential election. This decline reflects a series of lower highs and lows, with the pair potentially targeting the October low of 142.97.
Bearish Momentum Builds for USD/JPY
The drop from the monthly high of 156.75 kept the Relative Strength Index (RSI) below overbought territory, reducing the likelihood of intervention by the Bank of Japan (BoJ). The BoJ remains committed to supporting the economy, which could temper expectations of aggressive action to stabilize the yen.
Meanwhile, the Federal Reserve appears to be leaning toward a more neutral monetary policy. Minutes from the November meeting suggest that the Fed may continue to adjust its restrictive policy gradually if inflation trends lower and the economy maintains strong employment. However, persistent inflation, as signaled by the Personal Consumption Expenditures (PCE) Price Index, may force the Fed to adopt a slower pace of policy changes.
Speculation of a Fed rate cut in December adds to the USD/JPY’s bearish outlook. Still, the pair could attempt a recovery from the current decline if bearish momentum weakens.
Key Technical Levels to Watch
The USD/JPY has experienced its first three-day selloff since September. A break below the 148.70–150.30 zone (spanning the 38.2% Fibonacci retracement and 61.8% Fibonacci extension) could pave the way for a move toward the 144.60–145.90 region. Should the pair fail to hold the October low of 142.97, further declines toward 140.50–141.50 could follow.
Conversely, a recovery above 153.80 (23.6% Fibonacci retracement) could bring the 156.50 level (78.6% Fibonacci extension) back into focus. A breach of the monthly high at 156.75 may open the door for a move toward the 1990 high of 160.40.
Broader Implications for the US Dollar
The USD faces broader headwinds as markets anticipate the Fed’s December 18 rate decision. While a neutral policy stance may weigh on the dollar, persistent inflation could challenge this approach, leaving room for further volatility in USD/JPY.
As global markets remain on edge, technical and macroeconomic indicators will play a critical role in shaping the pair’s direction. Traders should monitor Fed commentary, inflation data, and key support and resistance levels for further insights into USD/JPY’s trajectory.
