Current dynamics

After a sharp decline last week and a new low from October 16, the USD/JPY pair has broken through the 151.50 support level and is trading at 149.95 during the Asian session amid a strengthening yen ahead of the Bank of Japan's December 19 meeting, where the regulator may raise the interest rate by 25 basis points.

Over the weekend, Japan's central bank chief Kazuo Ueda said officials were prepared to consider further tightening of monetary policy as recent macroeconomic data were in line with expectations. In November, the Tokyo region's consumer price index rose from 1.8% to 2.6%, and excluding food and energy, from 1.8% to 2.2%. In addition, industrial output rose from 1.6% to 3.0% month-on-month in October, below expectations of 3.8%.

As for the US dollar, the initial reaction to Donald Trump’s election as US President has passed: investors expect a tightening of tariff policy after his inauguration, which could lead to an increase in inflationary pressures within the country, as a result of which US Federal Reserve officials will act more cautiously. Now market participants are focusing on the regulator’s meeting on December 18: according to the Chicago Mercantile Exchange (CME) FedWatch Tool, expectations for an interest rate adjustment by -25 basis points to 4.50% have changed from 66.0% to 72.5% today, putting pressure on the national currency.

Support and resistance levels

The long-term downtrend continues: last week the price broke the support level of 151.50 and yesterday reached the support level of 149.25, after fixing below which it will be able to reach the target of 146.15. If during trading the quotes reverse at 149.25, then an increase to the resistance level of 151.90 is likely, from which new sales can be considered.

The medium-term trend changed to a downward trend this week after breaking through the support area of 151.25–150.72 with a target in zone 2 (146.12–145.63). In case of an asset correction to the trend resistance area of 154.97–154.42, short positions with a target of 149.13 will become relevant.

Resistance levels: 151.90, 154.45, 156.53.

Support levels: 149.25, 146.15, 141.93.

Trading scenarios

Short positions can be opened from the level of 151.90 with a target of 149.25 and a stop-loss of 152.75. Implementation period: 9-12 days.

Long positions can be opened above the level of 152.75 with a target of 154.45 and a stop loss of 152.05.