Selling USDJPY on corrective bounce ahead of BoJ decision

The USDJPY pair is getting a bit of a lift as traders play a waiting game ahead of the Bank of Japan's (BoJ) high-stakes decision. Recent chatter putting wind in the dollar's sails came from Federal Reserve (Fed) Governor Christopher Waller, who threw cold water on the idea of rushing into more rate cuts, thus giving the greenback some steady footing.

All eyes are now laser-focused on the Japanese regulator's move tomorrow, December 19. The central bank is all but guaranteed to raise its borrowing costs to 0.75%—the highest they have been in thirty years. That alone is a game-changer for the yen.

What's more, the BoJ is expected to keep the door wide open for more hikes down the road, signaling that even a 1% rate would still be playing catch-up. This kind of talk will be seen as extremely hawkish, keeping yen demand firmly in the picture. No doubt, jitters about Japan’s spending plans have dragged on the national currency lately, but such pressure looks to have fizzled out.

As for the dollar, there is no new firepower for a major rally. Waller's comments merely echoed the party line instead of charting a new territory for greenback strength. Add to that the cloud of uncertainty around who will be the Fed's Chairman next year, along with the regulator's shift toward labor data over inflation, and the dollar's room to run looks capped for now. In this context, today's US Consumer Price Index (CPI) figures will likely fall on deaf ears.

From a technical standpoint, USDJPY is getting a bounce after its recent slide. The Chaikin Oscillator, while positive and climbing, shows bulls are making a move. On the flip side, the Stochastic Indicator is now sitting in neutral (%K=39, %D=35) and starting to hook higher. This configuration backs the current surge. But don't get it twisted: this uptick looks like a head fake. It's a last-gasp rally for the market ahead of the BoJ's decision, offering traders a chance to sell into the bounce.

Pay attention to the trading plan outlined below:

Sell the USDJPY pair at the current price. Take profit: 154.320. Stop loss: 156.580.

This forecast holds true between December 18 and December 25, 2025.