USD/JPY, Oil Forecast: Two trades to watch

USD/JPY slumps as Ueda hints at a December rate cut

The Japanese yen is surging on Monday, boosted by comments from Bank of Japan governor Ueda, who suggested that a December rate hike could be on the table. Meanwhile, the US dollar struggled amid rising expectations that the Federal Reserve will cut rates next month.

BOJ governor Ueda said on Monday that the central bank is weighing the pros and cons of hiking rates at its policy meeting in December, giving the strongest hint so far that a rate hike could be on the cards.

The big question for the market will be: if the BOJ hikes rates, will it be a one-and-done, or is another coming? In which case, the yen could continue to rise higher.

The USD fell last week and is struggling to gain traction amid rising expectations that the Federal Reserve will cut rates next week, and as the market awaits confirmation of Jerome Powell's successor.

The market is pricing in 87% probability that the Fed will cut rates by 25 basis points next week. What is less clear is what happens after December. The Fed could do a hawkish cut, which could help support the US dollar beyond next week.

The dollar is also under pressure amid expectations that White House economic adviser Kevin Hassett could be the next Fed chair. Asset is known for his more dovish stance towards monetary policy, which would support expectations of further rate cuts in 2026.

This week is a busy one for US economic data, with ISM manufacturing data later today, ISM services PMI, ADP payrolls, and US core PCE data throughout the rest of the week.

USD/JPY forecast- technical analysis

USD/JPY ran into resistance at 158.00 and is now rebounding lower, testing 155 support. The bearish engulfing candle and the RSI pointing firmly downward support the view that sellers are in control. A break below here opens the door to 153, the October 10 high.

Should buyers defend the 155 level, a rise above 156.30 could bring 157.20 back into focus.

 

Oil rises on supply worries & despite OPEC+ leaving output unchanged

Oil prices climb after OPEC+ members decided to leave output steady, and as traders continue to monitor geopolitical developments.

The Caspian Pipeline Consortium, which carries 1% of global oil, halted operations after a Ukrainian drone damaged its Russian terminal. The attack on this export terminal drove oil prices higher amid reduced export volumes. Ukraine also attacked two oil tankers, adding to supply worries.

Sticking with geopolitical worries, President Trump raised concerns over the uncertainty surrounding Venezuela after saying the airspace above and surrounding Venezuela should be considered closed. This raises worries, given that the South American nation is a major oil producer.

OPEC+ and its allies agreed to pause output increases in January and the first quarter of 2026, slowing their drive to regain market share amid looming fears of a supply glut.

On the data front, China's factory activity unexpectedly contracted in November 14 to 49.9, missing analysts' expectations of 50.5. China, the world's largest oil importer, has seen the longest slump in factory activity on record. This could limit the upside in oil prices.

US manufacturing PMI data is due out later today

Oil forecast- technical analysis

Oil trades within a falling channel dating back to early July. The price is testing the upper band of the falling channel, the 50 SMA, and 60.00, the round number.

Buyers will need to close above this key resistance to open the door to 62.50, the late October high. A rise above here exposes the 200 SMA. Above 65.00, the round number comes into play.

Failure to rise above 60.00 could see the price rebound back towards 57.50, the November low. Below here, 56.00, the October low comes into focus.

By Fiona Cincotta