The 160 level remains a key resistance zone on the USD/JPY chart, defining the next structural move ahead of the Bank of Japan (BOJ) and Federal Reserve policy meetings this month.
The Japanese yen continues to face pressure from broad US dollar strength, supported by stronger-than-expected US economic data. ADP private payrolls rose to 122K, one year high, reinforcing expectations that the US labor market remains resilient despite elevated inflation rates.
The move also aligns with the bullish trend in crude oil prices, discussed in my previous analysis, while US Treasury yields are attempting a bullish rebound on the weekly timeframe following a two-week decline.
US Treasury Yields Support the Dollar
US 02Y, 05Y, and 10Y Treasury Yields – Weekly Timeframe (Log Scale)
Source: TradingView
Weekly momentum remains above the neutral 50 level, supporting the risk of higher Treasury yields and a continued hawkish stance from the Federal Reserve.
Higher yields continue to underpin demand for the US dollar, especially as investors reassess the likelihood of interest rate cuts this year. If incoming economic data remains resilient in line with rising inflation rates, yields could extend their rebound, providing additional support for USD/JPY.
BOJ Policy Outlook and Japanese Bond Yields
Japan 10-Year Government Bond Yield
Source: TradingEconomics
Japan’s 10-year government bond yield remains near 2.65%, holding close to multi-year highs after Bank of Japan Governor Kazuo Ueda reiterated that policymakers should weigh the benefits and costs of further rate increases if inflation risks begin to outweigh downside risks to economic growth.
Markets continue to price in a 25-basis-point BOJ rate hike later this month, which would lift the policy rate from 0.75% to 1.00%.
Rising energy costs linked to the ongoing Middle East conflict are adding to inflationary pressures in Japan, strengthening the case for additional policy normalization. Such a move could weigh on USD/JPY while influencing broader market dynamics, as investors balance US dollar strength against continued optimism surrounding the technology and AI sectors.
USD/JPY Price Outlook: Weekly Outlook – Log Scale
Source: TradingView
From a weekly perspective, USD/JPY has maintained a bullish structure since 2022, respecting the boundaries of a long-term ascending channel while also trading within a shorter-term one-year rising channel that continues to define the pair’s directional bias.
The pair is now challenging the key psychological and multi decade resistance zone at 160-163.
A sustained breakout above 160 could open the door toward 161.30 and 163.20, representing the channel midpoint and a major resistance zone that capped gains in 2024. A successful break above this region would expose the upper boundary of the long-term channel near 165.00 and 168.00.
Beyond that, the longer-term projection points toward 180.00. However, the probability of BOJ intervention is likely to increase significantly as price approaches these levels. Momentum indicators are already showing signs of bearish divergence against price action, suggesting that upside momentum is beginning to slow.
The lower boundary of the one-year ascending channel remains the key support level to monitor.
On the downside, a break below 158.00 and the lower boundary of the one-year rising channel would increase the risk of a deeper correction toward 155.00 and 152.00. A move below these levels would expose the long-term channel support near 147.00.
Key Drivers Defining the Long-Term USD/JPY Outlook
- BOJ versus Federal Reserve policy outlooks
- The 160.00–163.20 resistance zone
- The 158.00–155.00 support zone
- The direction of US Treasury yields
- Energy prices and inflation expectations
- Potential BOJ currency intervention risks
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
