USD/JPY drops below 155.00: Has the 2025 yearly top been reached?

After two months of a relentless rout in the Yen, the Japanese currency is finally finding some stable ground.

The core of the current reversal lies in the clash between the administration’s fiscal policy and the central bank’s monetary response: fiscal recklessness has finally been met with monetary soundness.

Prime Minister Takaichi has been pushing to implement massive stimulus packages, while also pressuring the Bank of Japan to keep rates low to support these projects.

Still, Markets don't get by the "cheap money" concept, which has led to a precipitous 5% to 8% move in the JPY against most majors since the beginning of October.

To balance things out, a round of increasingly hawkish tones from Bank of Japan Governor Kazuo Ueda has reversed the course over the past few weeks, winning his first showdown against Takaichi – as provided by a Reuters Headline.

Ueda confirmed overnight that current policy remains "accommodative" even after recent adjustments, underscoring the necessity of a planned exit from ultra-loose policy – The next BoJ Meeting is on December 19.

The Central Bank is actively working to narrow its estimate of the neutral rate (the level that is neither stimulative nor restrictive).

This rhetoric has created a strong market expectation for a December rate hike, supplemented by strong Japanese Inflation reports.

Complemented by some renewed weakness in the US Dollar, the Yen’s resurgence has led to a top being found in USD/JPY, which has plunged more than 2% off its November highs.

Let's examine the charts to see if technicals suggest a definite top or a temporary resistance.

Read More:

• North American Mid-Week Market Update – Trump drama and the Next Fed Chair
• Bitcoin (BTC/USD) Price Alert: Bitcoin Breaks Major Resistance - Next Stop $100,000?
• Nasdaq Index Outlook: Microsoft (MSFT) scares Markets despite strong Services PMI report

Since the change in tone from the Bank of Japan, the sky-high prices have been rejected in a daily tight bear channel formation (Where no green candle overlaps the preceding red bar – A sign of seller strength).

Falling 3,000 pips from its highs, the pair has broken below the key 155.00 psychological level but remains above its Daily Pivot Zone, decisive for long-term bull/bear strength.

Looking at the Daily RSI, it's currently crossing the neutral zone which confirms the shift in trend but isn't yet in bearish territory.

Traders will have to consider tomorrow's US Core PCE release, but barring any major crazy beat, the path for USD/JPY is towards some downside.

USD/JPY technical levels of interest:

Support Levels:

• Session Lows 154.50 and Short-timeframe support
• 153.00 to 154.00 Key Resistance now Pivot
• 50-Day MA 153.00
• 150.00 Psychological Support and 50-Week MA
• 146.00 August Range Main Support

Resistance Levels:

• December 1 highs 156.15 (short-term resistance – 156.00 to 156.30)
• 156.90 to 157.95 recent peak resistance
• 2025 Highs and April 2024 peaks 158.80 to 160.00
• 1990 and July 2024 Peak 161.00 to 162.00

Looking closer to the 1H Timeframe, we spot prices evolving within a downward channel and remaining below the two key 50 and 200-period Moving Averages, the intermediate trend is bearish.

Still, the corrective move may have reached a temporary bottom with the RSI reaching oversold and a rebound attempt is ongoing.

For interesting levels to join the trend, monitor two levels:

• Reactions at 155.00 (+/- 100 pips) to spot if the level attract further movement towards the channel lows
• On further mean-reversion higher, look at 155.40 which is the 50-H Moving average.
• For bulls, look at a break and close above the channel (155.50)

Expect traders to wait for Core PCE for decisive moves.

Safe Trades!

Follow Elior on Twitter/X for Additional Market News, interactions and Insights @EliorManier