USD/JPY forecast: Dollar needs a nudge from US data to get moving again

The US dollar has had a slightly choppy start to the year, initially catching a bid on the back of weekend developments in Venezuela before giving some of that ground back, only to recover again into Tuesday. What’s notable, though, is how quickly markets have brushed aside the geopolitical noise – not just from Venezuela, but also from Greenland. With geopolitics taking a back seat, attention turns firmly to the US data calendar. This week’s employment indicators could influence the USD/JPY forecast and the near-term direction of other major pairs.

 

 

Geopolitics fail to rattle risk appetite

 

Following the weekend’s dramatic headlines out of Venezuela, the dollar started the first full trading week of 2026 on the front foot. The euro and Swiss franc softened, while gold, silver and equity markets all pushed higher. Oil prices were more volatile, swinging sharply before slipping back on Tuesday amid concerns over additional supply coming to market. Oil prices softened after President Trump suggested the US could take control of up to 50 million barrels of Venezuelan crude.

 

But the broader market reaction has been notably muted. The dollar has clawed back some ground, though this looks more like seasonal inflows and weakness for the likes of euro (hit by weaker data) than any geopolitical premium.

 

As mentioned, the market response has been mixed rather than defensive. That suggests investors are not expecting immediate escalation, instead weighing short-term uncertainty against longer-term implications for Venezuelan oil production. While deeper US involvement in Venezuela, or any form of military action linked to Greenland, would be more market-moving – potentially driving some flows back into the yen – risk appetite remains intact for now. That backdrop continues to underpin USD/JPY.

 

All eyes back on US data

 

A raft of US employment reports is due for the rest of this week, which could help shape market expectations for the early part of January. Historically, the dollar often struggles in December before finding its feet again as the new year gets underway. With a large chunk of Federal Reserve easing already priced in, dollar bears may find it hard going unless the data take a clear turn for the worse. Any upside surprises, therefore, should help support the USD/JPY forecast, particularly with the yen still under pressure amid a lack of meaningful pushback from either the Bank of Japan or the Japanese government.

 

Admittedly, it hasn’t been the strongest start to the year for US macro numbers, with this week’s ISM manufacturing PMI coming in on the soft side. That said, it followed a run of stronger-than-expected data towards the end of 2025, including jobless claims, pending home sales and Q3 GDP. Growth in Q3 was revised up to an annualised 4.3%, well above the 3.3% consensus, which complicates the argument for aggressive Fed rate cuts this year.

 

At present, markets aren’t fully pricing in the next 25bp cut until June, with a second one pencilled in for September. Those expectations could easily be pared back if this week’s labour market data come in firm. Today’s ISM services PMI is expected to soften, but price action is more likely to be driven by the ADP employment report – where consensus sits just below 50k – alongside the JOLTS job openings figures. With the Fed now more focused on employment than inflation, these releases carry added significance for the dollar. For now, the near-term outlook for the greenback remains neutral to mildly constructive.

 

Technical USD/JPY forecast: Price action still favours the upside

 

From a technical point of view, despite this week’s pullback from the 157.00 area, the path of least resistance for USD/JPY still looks higher. The main bearish argument at this stage is that the pair failed to post a fresh 2025 high during the rally that began back in April. The move stalled just below 158.00 in November, leaving the January 2025 peak at 158.88 intact.

 

 

 

That said, this looks more like consolidation than a trend reversal on the USD/JPY chart. The key levels to watch are trend support from the broader triangle pattern and the 21-day exponential moving average, both sitting around the 156.00 area. As long as the bulls can defend that zone, the upside bias remains intact. A clear break below it, however, would open the door to a deeper pullback towards 155.00 once again.

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R