Selling USDJPY on high hopes for imminent BoJ rate hike

A dramatic shift in market expectations for global central bank policy is currently weighing on USDJPY. The Japanese regulator is projected to raise interest rates in December, while US Federal Reserve (Fed) officials are adopting an increasingly dovish stance. This has put the currency pair under significant pressure after it reached a 10-month high last week.

The Bank of Japan (BoJ) has recently tightened its rhetoric in response to the yen’s decline and stubborn inflation, which is being fueled by high import costs. Board members Masu and Koeda publicly stated that the timing for a rate hike is approaching, signaling a growing consensus among policymakers. Notably, Prime Minister Takaichi, known for her dovish monetary policy stance, did not object, realizing that a stronger yen would enhance the effectiveness of the government's massive fiscal stimulus.

Meanwhile, recent data from the United States suggest the economy is cooling. Retail sales for September showed the smallest increase in months, pushing consumer confidence down to a 7-month low in November. Such statistics align with the views of influential Fed Board members, who advocate for a December rate cut. Markets are now pricing in an over 80% probability of this scenario. This undermines the dollar’s strength.

The yen, in the meantime, got a temporary boost from Japan’s largest fiscal stimulus package since the pandemic. Traders are keeping a close eye on the next BoJ’s move. Although the government is working on minimizing new borrowings, concerns persist regarding the long-term sustainability of public finances.

From a technical standpoint, the USDJPY pair has entered a consolidation phase. The price is now hovering around Thursday's open levels, confirmed by a moderately bearish signal from the Stochastic Indicator, which is below the 50 threshold. The Chaikin Oscillator remains within positive territory but is heading downward due to waning buying pressure. Overall, the technical picture appears mixed.

Pay attention to the following trading strategy:

Sell USDJPY at the current price, placing Take profit at 154.000 and Stop loss at 157.680.

The forecast is valid from November 27 to December 4, 2025.