Created on January 08, 2026

The US dollar continues to drift a bit against the yen, as we are in the middle of a major consolidation area. Traders will likely be focused on Non-Farm Payroll this Friday for the next move.

The US dollar drifted a little bit lower against the Japanese yen during early trading on Wednesday, as we continue to stay stuck between two major levels in consolidation. With that, I’m watching the 158 yen level above very carefully as it is a major resistance barrier, and the 154.50 yen level below as it is a major support level. It’s worth noting that the 50-day EMA has just crossed the 155 yen level, so it is potential support there as well.

As we go through the week, we’ll start to focus on the non-farm payroll announcement, and that tends to have a major influence on this pair and, by extension, causes it to react to the bond markets, which obviously will move as well. The interest rate differential still favors the US dollar, so I still favor the upside overall.

Market Reaction to Bank of Japan

I also recognize that this is more or less a consolidation than anything else. The market is likely to remain somewhat tight and rangebound for the short term, but eventually, we will have to make a decision, perhaps in the next Bank of Japan meeting, as there are a lot of questions as to whether or not they will actually attempt to tighten monetary policy.

With the massive amount of debt in Japan, it’s difficult to imagine that being a long-term play, but in the short term, it does cause some noise here. Anything above the 158 yen level really has this market taking off. I suspect running to the 160 yen level.

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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.