USD/JPY fell late in the North American session as weaker US equities supported safe-haven demand for the Japanese Yen and Gold. The pair traded at 154.71 after a daily high of 155.04.
The US Dollar weakened after the US Supreme Court ruled against IEEPA tariffs imposed by the Trump administration. The US Dollar Index (DXY) was down 0.07% at 97.73.
Key Data And Policy Signals
US Factory Orders in December fell 0.7% month-on-month, reversing November’s 2.7% rise, linked to softer aircraft bookings. Comments from Fed Governor Christopher Waller helped limit the decline after USD/JPY moved below 154.00.
Waller said he leans towards further easing, but added that if February’s labour data is stronger than January’s, rates could stay unchanged. Upcoming US releases include Conference Board Consumer Confidence and the ADP Employment Change 4-week average; Japan has no scheduled releases, but Tokyo CPI and January Industrial Production are due.
On the chart, a simple moving average sits near 156.00, with RSI at 47.21, and a descending trend line from 157.66 capping rebounds near 155.11; a break may open 155.87. Support is noted near 152.48 and 152.10, with a close above the descending resistance improving the set-up.
A monthly performance table showed the Japanese Yen was strongest against the British Pound.
Longer Term Market Context
Looking back at the analysis from early last year, we saw a temporary dip in USD/JPY towards 154.70. This was caused by a brief flight to safety and a Supreme Court ruling that weakened the dollar. Today, the situation has evolved, with the pair trading significantly higher as macroeconomic fundamentals have taken over.
The hawkish stance from Fed officials in 2025, like Christopher Waller, proved to be the more dominant theme. Throughout last year and into this one, U.S. labor market data has consistently beaten expectations, with the most recent Non-Farm Payroll report for January 2026 showing a robust gain of over 225,000 jobs. This persistent strength has kept the Federal Reserve from cutting rates, supporting the dollar’s value.
On the other side, Japanese data has not provided a compelling reason for the Bank of Japan to tighten its policy aggressively. We noted last year that traders were watching Tokyo’s inflation figures, and recent data shows core CPI is still struggling to hold above the central bank’s 2% target, coming in at 1.8% year-over-year. This has maintained the wide interest rate differential between the U.S. and Japan.
For derivative traders, this environment suggests focusing on volatility. With USD/JPY approaching multi-decade highs near 160.00, the risk of verbal or actual intervention from Japanese authorities is increasing. One-month implied volatility has already climbed from 8.0% to 9.5% in recent weeks, making long volatility option strategies like straddles attractive to capture a potential sharp move in either direction.
The interest rate differential, now over 500 basis points, continues to make the carry trade profitable. This involves buying the higher-yielding dollar while selling the low-yielding yen. Traders should consider using forward contracts to lock in this positive carry, but must remain cautious and use tight stop-losses given the heightened risk of sudden policy shifts from Tokyo.
