The Japanese yen struggles to gain significant advantage despite the BoJ’s rate hike

USD/JPY initially dipped early Friday following the widely expected 25 basis point rate hike by the Bank of Japan (BoJ). Despite this bringing Japan’s interest rates to their highest level in 17 years, the yen’s weakness was short-lived, as the pair quickly rebounded by approximately 100 pips. This suggests the dollar remains well-supported, primarily due to the significant monetary policy divergence between the Federal Reserve and the BoJ.

The pair has repeatedly failed to break below the key Fibonacci support at 154.97 (38.2% retracement of the 148.64–158.87 rally), bolstered by the nearby 55-day moving average (55DMA) and trendline support. This area is forming a potential higher base, though confirmation is still pending, indicating a lack of momentum for a decisive downside move.

In the short term, USD/JPY continues to trade within a narrow range for the seventh consecutive day, awaiting a clearer directional signal. The BoJ’s decision has so far failed to trigger a stronger move lower.

A potential bear trap pattern forming on the daily chart adds an initial positive signal. However, for confirmation of a higher base, the pair would need to close above the current range top at 156.75 and the 20DMA at 156.94.

Alternatively, a firm break below the 154.97 support zone, including the 55DMA and trendline, would serve as a strong bearish signal, pointing to an extended pullback from the multi-month peak at 158.87.

Technical indicators on the daily chart remain mixed, offering no clear signals. However, the broader outlook remains firmly bullish, suggesting that any near-term corrections are likely to be limited and followed by a fresh push higher.

Res: 156.46; 156.75; 156.94; 158.08
Sup: 154.97; 154.76; 154.50; 153.76