• USD/JPY is testing a crucial support level.
• BOJ rate hike expectations are growing on the back of strong data.
• Key support levels are at 151.53 and 150.00, while resistance levels are at 153.91, 155.00, and 156.27.

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USD/JPY has found some support following a 150 pip drop during the Asian and early European sessions. The pair has found some support at a key confluence level where both the 100 and 200-day MA rests. 

Will we get a break or bounce off this key level?

Japanese PMIs and Fundamental Backdrop

After Tokyo’s core CPI hit 2.5%, the BOJ raised interest rates by 25bps and hinted at more hikes to curb Yen weakness against the Dollar. Since then the Yen has made a steady move higher with another positive coming from the services PMI data which kept growing in January, hitting its highest point since September 2024 and staying in the growth zone for three months in a row. Employment and prices charged also went up, showing strong job conditions and steady inflation ahead.

The Yens renewed strength today however came courtesy of strong wage growth data which further supports Bank of Japan rate hikes moving forward. 

Workers’ cash earnings went up more than expected in December, and November’s numbers were revised higher. If Shunto wage talks match last year’s strong results, there is a growing belief that the Bank of Japan might raise interest rates by 25 basis points as early as May. 

Economic Data Ahead

The major data release left for this week will come on Friday with the US NFP jobs report and average earnings data. 

There is a possibility that the US jobs market may start to tighten if companies see uncertainties from potential trade wars continue to grow. For now though I do not expect any significant surprise from the NFP data on Friday.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar.

Technical Analysis USD/JPY

From a technical standpoint, USD/JPY is currently trading at a key confluence level where both the 100 and 200-day MAs rest. 

A daily candle close below this level could be a precursor for further downside which is further enforced by the growing belief in further rate hikes from the BoJ. 

USD/JPY Daily Chart, February 5, 2025

Source: TradingView (click to enlarge)

Dropping down to the four-hour chart (H4) and there is further support which rests at 151.53 before the psychological 150.00 handle comes into focus.

There are some concerns here for bears with the RSI 14-day on the H4 chart in oversold territory. 

Also from a price action perspective, the selloff was quick and does leave the pair with a possibility of a short term pullback toward immediate resistance at 153.911 before the 155.00 handle comes back into view. 

USD/JPY Four-Hour (H4) Chart, February 5, 2025

Source: TradingView (click to enlarge)

Support

• 151.53
• 150.00 (psychological level)
• 148.64

Resistance

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