Created on January 09, 2026

• The carry trade is still a very strong driver at the moment in a lot of the Japanese yen-related pairs, including the USD/JPY market.
• The US dollar drifted a bit lower against the Japanese yen to kick off the Thursday session, but we have seen a turnaround show us signs of upward momentum.
• The carry trade is still a very strong driver at the moment in a lot of the Japanese yen-related pairs, so despite the fact that the Bank of Japan has recently raised interest rates, the reality is that they are light years away from trying to tighten monetary policy enough to really turn things around.

With this being said, the market will, of course, remain a little bit noisy, but if we can break to the upside and finally clear the 158 yen level, we could really take off. At that point, I think we could go looking to the 160 yen level, which is an area where the Bank of Japan intervened ages ago.

Technical Support and Future Targets

Short-term pullbacks will end up being buying opportunities, I believe, and as a result, the support levels that I’m watching include the 50-day EMA and the 155 yen level. These are areas that I think will remain very important, but I think it is difficult to break down below.

If we were to break down below that area, then you could have a lot of problems for the US dollar, and I think you have a situation where if that does in fact happen, the 152 yen level might be your next target.

Ultimately, though, despite the fact that the Bank of Japan has raised interest rates and the Federal Reserve has cut, you still have a pretty wide gap between the two, and therefore, if you’re looking for the carry trade to play out, you are looking for the US dollar to remain somewhat resilient against the Japanese yen. Beyond that, the US dollar itself is fairly resilient, mainly due to the fact that the economic numbers coming out of America are stubbornly strong, so even if the Federal Reserve does cut it can only do so in a limited way.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.

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.