Published: 5 December 2025,07:25
Daily Market Analysis New
*Rising expectations of a December rate hike mark a sharp shift from November’s weakness under fiscal concerns.
*Strong GDP and persistent inflation have pushed JGB yields to multi-year highs, boosting yen attractiveness relative to USD, EUR, and GBP.
*Traders now assign ~80% odds of a December hike, setting the stage for a potential sustained yen recovery into 2025.
The Japanese yen has staged a notable rally at the start of December, marking a sharp reversal from its depreciation trend in November, which was fueled by fiscal concerns under new Prime Minister Sanae Takaichi. The shift in momentum is primarily driven by increasingly hawkish signals from the Bank of Japan, raising expectations for a potential rate hike at its December 18-19 policy meeting.
This repricing has narrowed the interest rate differential between Japan and other major central banks—including the Federal Reserve, European Central Bank, and Bank of England—which had previously weighed heavily on the yen. The prospect of policy normalization has also lifted Japanese government bond yields to multi-year highs, further supporting the currency’s appeal.
Supporting the hawkish narrative, recent economic data have surprised the upside. Third-quarter GDP growth exceeded forecasts, while inflation measures have remained sustainably above the BoJ’s target, reinforcing the case for policy adjustment.
Market pricing now reflects approximately an 80% probability of a rate hike in December. Should the BoJ follow through, it would likely extend the yen’s rebound, confirming a structural shift in monetary policy that could redefine its trajectory well into the new year.
The EURJPY pair has entered a phase of consolidation, trading within a defined range between 181.40 and 180.20 for the past two weeks. The pair is now testing the lower boundary of this range, a critical juncture that will determine its near-term trajectory. A decisive breakdown below the 180.20 support level would signal a potential bearish trend reversal, invalidating the recent period of equilibrium.
Momentum indicators are aligning with this cautious outlook. The Relative Strength Index (RSI) is gradually declining, suggesting waning buying pressure. Simultaneously, the Moving Average Convergence Divergence (MACD) is exhibiting a lower-high pattern and is poised for a bearish crossover below its zero line. This configuration indicates that the prior bullish momentum has dissipated, shifting the near-term bias to the downside.
The pair’s immediate direction hinges on its interaction with the 180.20 level. A sustained break below this support would likely trigger accelerated selling, targeting the next significant support zone near 179.50. Conversely, a firm rebound from this level would maintain the current range-bound structure, with initial resistance expected at the 180.80 mark. Traders should monitor for a confirmed close below 180.20 as a key signal for a bearish shift in market structure.
Resistance level: 182.45, 184.40
Support level: 180.20, 177.80
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