Buying USDJPY on technical rebound with 154.75 in sight

The USDJPY pair has recently hit the brakes following a dramatic freefall that shattered key psychological support levels. After plunging to lows near 152.10, the market is showing tentative signs of stabilization, which suggests the potential start of a technical recovery.

On the daily chart, the picture is screaming of oversold exhaustion. The pair has decisively broken below the Bollinger Band at 153.128 and is currently trading beneath it—a clear signal of extreme selling pressure that often precedes a snap-back correction. This breach, coupled with the widening channel, underscores intense volatility and sets the stage for a sharp move.

Momentum indicators are aligning to support a rebound thesis. More precisely, the Stochastic Oscillator is flashing a telltale bullish signal: its %K line has plunged into oversold territory near 15 and is now curving up, ready to cross above the %D one. This suggests that the downtrend is losing steam. Concurrently, the Chaikin Oscillator is no longer plunging, though it is still in the red. In other words, relentless selling pressure may be easing.

Fundamentally, the backdrop remains a headwind for the greenback. Despite denials from US Treasury officials who have reaffirmed a "strong dollar" policy, the specter of coordinated foreign exchange (FX) intervention keeps haunting the market. 

From Tokyo, the Bank of Japan's latest minutes show increased worry over inflation due to a soft yen, solidifying the view that further monetary tightening is on the horizon.

Nevertheless, the immediate political calendar may act as a circuit breaker. With pivotal national elections scheduled for February 8, authorities are likely to favor stability and may tacitly curb excessive yen strength to avoid market turmoil before the vote. This creates a window where a controlled, technical rebound in USDJPY becomes the path of least resistance until February 5.

The plan down below outlines a potential trade setup:

Buy USDJPY at current levels. Profits are taken at 154.750. Stop loss is set at 151.950.

This forecast holds true from January 29 till February 5, 2026.