Published: 16 December 2025,07:53
Daily Market Analysis New
*Yen gains over 1.3% as markets price a 94% probability of a 25bp BoJ rate hike, supported by hawkish signals from Governor Ueda and intervention warnings from officials.
*Persistent inflation above target, solid wage growth, and reduced political uncertainty strengthen the case for policy tightening.
*With expectations stretched, a confirmed hike may trigger a muted reaction or “buy the rumor, sell the fact” unless BoJ guidance signals further tightening ahead.
Market Summary:
The Japanese Yen has demonstrated notable strength over the past 24 hours, appreciating more than 1.3% against a softening U.S. dollar from last week’s peak near 157.00. This rally is primarily driven by intensifying market conviction that the Bank of Japan will raise its policy rate by 25 basis points at its upcoming meeting this Friday.
Market pricing now reflects a 94% probability of a hike, a view bolstered by recent hawkish guidance from BoJ Governor Kazuo Ueda and explicit warnings from government advisor Takuji Aida regarding readiness for currency intervention to stem excessive Yen weakness. Fundamental conditions further support policy normalization: sustained wage growth and inflation remaining firmly above the BoJ’s target have created a compelling domestic case for action. Furthermore, the mitigation of political uncertainty under the new administration has removed a significant obstacle, allowing the central bank to refocus on its inflation mandate.
While the Yen is positioned to extend its gains in the immediate lead-up to the announcement, the market’s overwhelming expectation suggests the event risk is heavily priced into current levels. Consequently, the immediate reaction to a confirmed hike may be muted or could even trigger a “buy the rumor, sell the fact” response unless accompanied by unexpectedly hawkish forward guidance signaling a clear path for further tightening. The primary near-term catalyst for sustained JPY strength would therefore shift from the rate decision itself to the BoJ’s updated economic projections and Governor Ueda’s post-meeting commentary.
Technical Analysis
The USDJPY pair has sustained its downward trajectory, erasing all prior gains to establish a new low for the week, underscoring the prevailing strength of selling pressure. Amid this decline, a minor technical rebound was decisively capped below the pivotal 61.8% Fibonacci retracement level at 156.17. This rejection serves as further confirmation that the pair remains firmly within a bearish structural phase, with sellers actively defending key retracement levels.
Momentum indicators align with the deteriorating price action. The Relative Strength Index (RSI) continues its descent toward oversold territory, reflecting accelerating selling momentum. Concurrently, the Moving Average Convergence Divergence (MACD) has confirmed its bearish posture, maintaining a position below the zero line while extending its downward slope. This configuration signals that bearish momentum is not only present but intensifying.
The convergence of a new weekly low, a clear rejection at a major Fibonacci level, and bearish momentum readings presents a coherent technical case for continued downside. The 156.17 level now transforms into immediate resistance. The pair’s path of least resistance remains skewed toward a test of lower support zones, with any near-term rallies likely to be viewed as corrective within the broader downtrend unless a sustained break back above 156.17 is achieved.
Resistance level: 156.00，157.60
Support level: 154.35, 152.90
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