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At the balance, the dollar is still trading higher on the day in the major currencies space. But against the Japanese yen, the greenback is now trading lower with USD/JPY sliding back from a high of 157.30 earlier in the day to 156.55 currently. The situation is Venezuela prompted some safety flows into the dollar but market players should be realising now that this is one of those geopolitical moves that will eventually be faded.For one, equities are not showing any worries about it all with US futures pointing higher and European indices also posting modest gains today. On the latter, the DAX even briefly touched a fresh record high in the opening hour earlier. So, it’s a new year but same old story for risk trades.Circling back to USD/JPY, the price action we’re seeing is a bit more complicated. The dollar had a weak 2025 showing with the outlook not seemingly much better as we get into the new year. However, the same can be said for the yen.The Japanese currency has its own set of problems, not least needing to deal with increasing fiscal risks and rising debt levels. Meanwhile, prime minister Takaichi’s expansionary fiscal policies are running up against the BOJ’s appetite of wanting to raise interest rates further.All of that put together is also hurting the yen as much as it does the dollar, as well as its own status as a safe haven asset. So, it’s a case of tit-for-tat it would seem.Since October, the path of least resistance is still for USD/JPY to trend higher and I would argue that hasn’t changed since December. There is a bit of a consolidation around 155.00 to 157.90 currently, so we’re very much stuck in a bit of a range for the pair.For this week, the near-term chart will be in focus with the pair now running down to test its key hourly moving averages. The confluence of the 100 (red line) and 200-hour (blue line) moving averages at 156.51-55 will be a focal point. Keep above that and the near-term bias holds more bullish but break below and the bias turns more bearish instead.But as mentioned above, the pair has much room to roam at the moment between 155.00 to 157.90 as a whole. That defines the opening range to start the year for USD/JPY.
This article was written by Justin Low at investinglive.com.
💡 DMK Insight
The dollar’s recent pullback against the yen signals potential volatility ahead for USD/JPY traders. After hitting a high of 157.30, the drop to 156.55 could indicate a short-term correction or profit-taking, especially with the broader dollar strength still intact against other major currencies. This divergence suggests that traders should keep an eye on key support levels around 156.00, which, if broken, could trigger further selling pressure. Additionally, the geopolitical situation in Venezuela might be influencing market sentiment, adding another layer of complexity. If tensions escalate, we could see a flight to safety that favors the yen, further impacting USD/JPY. For those trading this pair, monitoring the 156.00 level will be crucial. A bounce could present a buying opportunity, while a break could lead to a deeper retracement. Keep an eye on upcoming economic data releases that might sway dollar sentiment, particularly any news that could affect risk appetite in the markets.
📮 Takeaway
Watch the 156.00 support level on USD/JPY; a break could signal further downside, while a bounce might offer a buying opportunity.
