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The USD/JPY pair fell to 158.16 on Friday as the Japanese yen continued its recovery from earlier this week. Market participants are increasingly focused on the upcoming Bank of Japan (BoJ) meeting, hoping for clearer signals regarding the future pace of interest rate hikes.

The regulator is widely expected to keep its policy parameters unchanged at the next meeting. However, investors are already pricing in the next rate hike as early as June. BoJ Governor Kazuo Ueda recently reiterated that the central bank remains ready to tighten policy if economic momentum and inflation dynamics continue to align with official forecasts.

Additional support for the yen came from renewed concerns over possible currency intervention as USD/JPY approached the psychologically important 160 level. Japanese authorities have repeatedly warned against sharp, unilateral exchange rate movements, increasing market sensitivity in this zone.

At the same time, political uncertainty continues to weigh on the yen. Markets are factoring in the possibility of early parliamentary elections. According to media reports, Prime Minister Sanae Takaichi may announce the dissolution of the lower house in an effort to push forward a more active fiscal policy. Further details are expected to be presented to representatives of the ruling coalition on 19 January.
 

Technical Analysis
 

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On the H4 chart, USD/JPY has corrected to the 157.90 area. For today, it is relevant to consider the potential formation of the initial phase of a renewed upward structure, targeting 159.59, with the prospect of a further move towards 160.00.

This scenario is technically supported by the MACD indicator, whose signal line remains above the zero level and is directed sharply upward, indicating that bullish momentum remains despite the recent correction.
 

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On the H1 chart, USD/JPY is forming a consolidation range around 158.77. The range has currently expanded downward to 157.97.

• A breakout below this level would likely trigger a decline towards 156.60
• A breakout to the upside would open the way for a bullish wave towards 159.59

This outlook is supported by the Stochastic Oscillator, whose signal line is positioned above the 50 level and is moving steadily upward towards 80, indicating growing bullish pressure.
 

Conclusion

USD/JPY remains at a critical juncture, balancing yen support from intervention risks and expectations of BoJ tightening against ongoing pressure from political uncertainty. In the short term, consolidation is likely to persist, but a breakout from the current range will define the next directional move. As long as the pair holds above key support levels, the broader bullish trend towards the 160 area remains technically valid, while a downside breakout would shift focus towards deeper corrective targets.
 

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