💹 USD/JPY: Rebounds Remain Limited — The Underlying Bias Is Still Down

— Policy shifts in both Japan and the US keep the pair under heavy pressure

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【1】Previous Session: Sharp drop to high-154s → mild rebound in NY

USD/JPY fell into the 154.80s, driven by a rare combination of factors:

• Bitcoin crash → risk-off yen buying

• BoJ’s Ueda signals December rate hike discussions → hawkish shift

• US ISM manufacturing deteriorates → renewed surge in rate-cut expectations

→ Result: US–Japan yield spread narrowed sharply (USD selling / JPY buying).

New York session saw a modest correction of oversold conditions, lifting USD/JPY back to the mid-155s.
Tokyo followed through to 155.77, but the bounce clearly lacked momentum.

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【2】Core Fundamentals: The macro setup is now decisively yen-positive

🇯🇵 Japan: December rate hike expectations gaining serious traction

BoJ Governor Ueda delivered distinctly hawkish messages:

• “December meeting will discuss rate adjustments”

• “Weak yen has negative effects on inflation”

• “Monetary easing needs to be recalibrated”

→ Markets have now shifted from a January hike scenario to a realistic December hike.
Bond markets are already pricing this in.

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🇺🇸 United States: December rate-cut odds surge to 87%

• ISM manufacturing weakened

• Signs of slowing activity

• Recent Fed commentary tilted dovish

Result: CME rate-cut odds jumped from 35% → 87% almost instantly.

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Bottom line

Japan: rate hike → stronger yen
US: rate cut → weaker dollar
➡ USD/JPY has a structural downside bias.

Short-term rebounds are purely technical and corrective.
The broader trend has already started turning yen-positive.

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【3】Today’s Market Focus: Test the rebound → resume downside pressure

Today’s USD/JPY is centered around two key questions:

1. Can the pair hold above 156?

2. Will it retest the high-154s again?

With little in the way of fresh US data, flows and technicals dominate.
Any rebound is likely to be shallow and short-lived.

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【4】Today’s Data: No US releases → Europe drives the market

With zero top-tier US data, directional cues are coming from Europe:

Eurozone

• Employment (Oct)

• Flash HICP (Nov)

United Kingdom

• Financial Stability Report

• Bailey’s speech

Emerging markets

• South Africa GDP

• Brazil industrial production

👉 Eurozone CPI was the main market mover.

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【5】London Open: Yen selling + USD buying pushed USD/JPY higher

At the start of London:

• USD/JPY → 156.08

• EUR/USD → 1.1603 (lower)

• GBP/USD → 1.3201 (lower)

The combination of yen selling + dollar buying pushed USD/JPY higher.

However, the move lacked conviction and appears to be position-adjustment ahead of renewed selling.

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【6】Eurozone data: Slightly firm CPI, weaker unemployment → limited EUR impact

Not strong enough to prevent ECB rate cuts, not weak enough to force them.
→ Ultimately EUR-neutral, not influential enough to change USD/JPY direction.

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✔ Final View: USD/JPY likely to fade 155-highs and resume its move toward the high-154s

🔻 Key downward drivers

• Rising probability of a BoJ December rate hike

• Strongly anchored US rate-cut expectations

• US–Japan yield-spread compression accelerating

🔃 Near-term rebounds are corrective only

• Risk-on flows (BTC, equities)

• Short covering

• Lack of US data today

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🎯 Conclusion

Even if USD/JPY holds above 156,
the pair remains in a market environment where retests of the high-154s are likely.

Rebounds remain short-lived, and the bias continues to favor selling into strength.