USD/JPY drops to a seven-week low as robust Japanese wage growth strengthens expectations for a BoJ rate hike

USD/JPY declined nearly 0.9% during Asian and early European trading on Wednesday, marking its third consecutive daily drop as the dollar remained under pressure, while the yen gained fresh momentum from stronger-than-expected wage growth in Japan, reinforcing expectations for further BoJ rate hikes.

The pair broke below the temporary base and 50% Fibonacci retracement of the 148.64–158.87 rally (at 153.76), as well as the thickening daily cloud base (153.36), signaling an extension of the short-term downtrend from the 2025 peak of 158.87 (posted on Jan 10).

Bears also tested the 200DMA (152.77), which forms the upper boundary of a key 152.77–152.41 support zone, reinforced by the 200DMA, 61.8% Fibonacci retracement, and 100DMA. A firm break below this area would confirm a reversal and deepen the correction of the broader Sep–Jan rally (139.57–158.87), exposing targets at 151.50 (38.2% Fibonacci retracement) and the psychological 151.00 level.

However, bears may face obstacles around this zone, with any limited upticks likely providing selling opportunities as daily technical studies maintain a predominantly bearish outlook.

Traders will closely monitor key U.S. data releases today, including the ADP private-sector payrolls report, December trade balance, and January Services PMI.

Res: 153.36; 153.76; 154.49; 154.70
Sup: 152.55; 152.36; 152.00; 151.50