Japanese Yen Short-term Outlook: USD/JPY Surge Targets Yearly Open- Fed to Dictate Breakout

Japanese Yen Technical Forecast: USD/JPY Short-term Trade Levels

USD/JPY approaching resistance at the 2025 yearly open ahead of the Fed rate decision
December opening-range breakout keeps the near-term outlook tilted to the topside
Traders eyed updated Summary of Economic Projections- risk for infection ahead
Resistance 157.14/19, 157.70/90 (key), 158.88- Support 156.18, 155.36 (key), 155

USD/JPY is on pace for a third-consecutive daily advance, with bulls now eyeing major resistance as traders brace for Wednesday’s highly anticipated Federal Reserve interest rate decision. The December opening-range breakout keeps the near-term focus pointed higher, while converging technical levels around the yearly open highlight a critical barrier for the broader uptrend. Whether the Fed leans dovish or strikes a more cautious tone, the reaction off this threshold will be pivotal in determining whether the next leg of the April advance can take hold or if another near-term pullback unfolds. Battle lines are drawn on the USD/JPY short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Yen setup and more. Join live on Monday’s at 8:30am EST.

Japanese Yen Price Chart – USD/JPY Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

Technical Outlook: In last month’s Japanese Yen Short-term Outlook, we noted that USD/JPY testing resistance and that, “losses should be limited to 155 IF price is heading for a breakout on this stretch with a close above 156.43 needed to fuel the next major leg of the advance.” Prices broke higher later that session with USD/JPY registering an intraday high at 157.90 the following day before exhausting. The subsequent sell-off extended more than 2.2% off the November high before rebounding off the 155-handle on Friday and the focus is on this recovery heading into major event risk tomorrow.

Japanese Yen Price Chart – USD/JPY 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/JPY on TradingView

A closer look at Japanese Yen price action shows USD/JPY breaking out of the late-November downtrend with a three-day rally now extending nearly 1.7% off the December low. The rally is trading within the confines of a tight channel formation, with the upper parallel highlighting upcoming resistance at the 78.6% retracement / 2025 yearly open at 157.14/19 and the 2025 high-day close (HDC) / November high at 157.70/90. A breach / daily close above this threshold would be needed to fuel the next major leg of the USD/JPY advance with subsequent resistance objectives eyed at the yearly high at 158.88 and the 2024 April high at 160.22.

Monthly open support rests at 156.18 and is backed by the weekly open at 155.36. Losses below the 155-handle would suggest a more significant high is in place and a larger correction is underway towards with the 23.6% retracement of the April rally at 153.65. Look for a larger reaction there IF reached.

Bottom line: USD/JPY is approaching confluent resistance into the 2025 yearly open and a breakout of the initial December opening-range keeps the near-term focus higher for now. From a trading standpoint, losses should be limited to 155.36 IF price is heading for a breakout on this stretch with a close above 157.90 ultimately needed to mark resumption of the broader uptrend.

Keep in mind the FOMC interest rate decision is on tap tomorrow. The focus will be on the Fed’s updated Summary of Economic Projections, and the interest rate dot-plot will be critical as investors adjust the outlook for monetary policy heading into 2026. As of now, Fed Fund Futures are nearly fully priced for a cut tomorrow (89%) with the next rate cut expected in April. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest Japanese Yen Weekly Forecast for a closer look at the longer-term USD/JPY technical trade levels.

Key USD/JPY Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

--- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on X @MBForex

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