Created on January 02, 2026

• The US dollar rose against the Japanese yen to close out 2025 as we continue to see a lot of back-and-forth action here.
• Ultimately, this is a market that I think continues to see a lot of noise and choppy behavior, but I also recognize that the interest rate differential continues to favor the United States dollar.

The Bank of Japan is in a situation where it simply cannot tighten monetary policy too much because of the massive amount of debt that the Japanese are currently suffering from. With this being the case, I think you’ve got a situation where you remain buy on the dip as far as your attitude is concerned.

Technical Levels and Outlook

The 50-day EMA reaching the 155 yen level is likely to see quite a bit of support, just as the 158 yen level above is significant resistance. If we can break above there, then it could open up the possibility of a move to the 160 yen level, and I do think that happens sooner or later.

Ultimately, this is a market that I think will continue to be very noisy, but again, as you get paid at the end of every day to hang on to the US dollar against the Japanese yen, I think you need to keep that in the back of your mind.

The market breaking down below the 50-day EMA opens up the possibility of a move down to the 153 yen level, but I don’t think that is the most likely of outcomes. Ultimately, I look at this as a market that continues to favor quite a bit of momentum, but in the meantime, we are just simply working off some of that momentum that we had built up over the last couple of months. I continue to favor the US dollar over the Japanese yen despite the fact that the Federal Reserve is likely to cut rates again.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.