Key Events
- While the Fed leans between dovish expectations and a rate hold depending on incoming data, the BoJ leans between data-dependent hawkish signals and a neutral hold. This dynamic is keeping USDJPY consolidating below the 158-mark until a dominant catalyst emerges.
- The DXY, USDJPY, and major dollar pairs are rallying toward key junctions and resistance levels that may define directional bias for Q1 2026.
NFP Report Trend Since 2021
Source: Forex Factory
Since 2021, NFP has shifted from post-pandemic excess toward late-cycle normalization, with the primary trend now pointing to labor-market fatigue rather than resilience. However, current market expectations lean positive, with an estimated +66k jobs, supporting DXY gains of over 0.8% this week, back near 99.
- USDJPY gains over 0.8% this week, back above 157
- USDCAD gains over 1%, back above 1.38
This sentiment is supported by Fed rate-hold expectations at 86.2%, alongside rising haven demand tied to US–Venezuela–Greenland frictions. NFP remains the short-term catalyst, with the potential to redirect trends and rate projections should results materially deviate from expectations. Key technical levels are outlined below.
catalyst potentially redirecting trends and rate projections should results significantly deviate away from expectations. Key technical levels are outlined below
DXY Outlook: 3-Day Timeframe – Log scale
Source: Trading view
Following my previous analysis on the 3-day time frame in “DXY, GBPUSD Outlook: Markets on Hold Ahead of FOMC”, I highlighted a larger potential double-bottom formation extending between June and September 2025, alongside a shorter double-top formation below the 100.30 zone during November. This structure opened the way for a full pattern move toward the 97.70 target, before reversing back to the pattern neckline at 99, where price is currently trading.
From here, given confirmation of the smaller double-top pattern, the scenarios are as follows:
A clean hold above the neckline and 99 resistance is expected to extend gains toward the 100.40 resistance, a level respected since July 2023. A breakout above this zone would open a bullish bias toward 102, 103.20, and 104.60, promoting corrective structures against 2025 trends across major FX pairs, including EURUSD, GBPUSD, USDCAD, and USDJPY.
RSI remains at a neutral junction, aligning with its moving average and the 50 level from below.
On the downside, a rejection from the 99 zone, accompanied by renewed dovish expectations, would likely challenge the 97.50 and 96 zones, defining either another sharp downside extension toward the 89 zone and 2021 lows, or a broader consolidation phase.
USDJPY Outlook: 3-Day Time Frame – Log Scale
Source: Trading view
Following USDJPY’s parallel uptrend from the April 2025 low at 139.80, price action continues to respect the trend connecting successive highs between May and November 2025, with key support located between 155 and 154.80. The pair remains in consolidation below the 158 high, which aligns with January 2025 highs.
In line with the DXY setup, USDJPY is now at a critical resistance junction that may define either a breakout toward the 160 zone, consistent with a bullish DXY bias into Q1 2026, or — should a close below 154.80 materialize — a downside continuation toward 153, 151.80, and 150, in line with the rising trend connecting higher lows since April 2025 and dovish policy expectations.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
