• Japanese Yen continues to lose ground amid the uncertainty over further BoJ tightening.
• Geopolitical risks benefit the USD’s status as the reserve currency and support USD/JPY.
• The divergent BoJ-Fed policy expectations warrant some caution for aggressive JPY bears.

The Japanese Yen (JPY) recovers slightly from a nearly two-week low, touched against a broadly firmer US Dollar (USD) earlier this Monday, though retains its negative bias heading into the European session. Speculations that Japanese authorities might step in to stem further weakness in the domestic currency hold back the JPY bears from placing aggressive bets. Adding to this, the divergent Bank of Japan (BoJ)-US Federal Reserve (Fed) policy expectations help limit losses for the lower-yielding JPY.

However, the lack of a clear timeline for future interest rate hikes by the Bank of Japan (BoJ) might continue to undermine the JPY. Moreover, rising geopolitical risks benefit the USD's reserve currency status and turn out to be another factor contributing to the JPY's relative underperformance, assisting the USD/JPY pair to hold above the 157.00 mark. Traders now look forward to this week's key US macro data, scheduled at the start of a new month, for Fed rate-cut cues and some meaningful impetus.

Japanese Yen bears shrug off BoJ rate hike bets, intervention fears

• The Bank of Japan raised its benchmark policy rate to a 30-year high level of 0.75% in December and signaled that the scale of future adjustments will depend on economic conditions. Moreover, informed sources said that the BoJ is expected to start full-fledged talks on implementing an additional rate hike if solid wage increases are confirmed in this year's shunto negotiations in spring.
• Investors, however, appear dissatisfied and remain uncertain about the pace of tightening amid bets that energy subsidies, stable rice prices, and low petroleum costs would keep inflation low into 2026. This continues to undermine the Japanese Yen for the fourth straight day, which, along with a broadly firmer US Dollar, lifts the USD/JPY pair beyond the 157.00 mark on Monday.
• The US Army's Delta Force – an elite special forces unit – attacked Venezuela and captured its President Nicolás Maduro, along with his wife, on Saturday. This comes on top of the lack of progress in the Russia-Ukraine peace deal, unrest in Iran, and issues surrounding Gaza, which keep geopolitical risks in play and benefits the Greenback's status as the global reserve currency.
• The USD touches a two-week high, though the upside seems limited amid speculations that the US Federal Reserve will lower borrowing costs in March and maybe deliver another rate cut later this year. Moreover, worries over the Fed's independence, especially under US President Donald Trump’s administration, could act as a headwind for the buck and keep a lid on the USD/JPY pair.
• Moreover, dovish Fed expectations mark a significant divergence in comparison to expectations of further monetary policy normalisation by the BoJ. Apart from this, intervention speculation should contribute to limiting losses for the lower-yielding JPY. This, in turn, warrants some caution before placing aggressive bullish bets around the USD/JPY pair and positioning for further gains.
• Traders now look forward to important US macroeconomic indicators, scheduled at the start of a new month, for more cues about the Fed's rate-cut path and some meaningful impetus. A rather busy week kicks off with the release of the US ISM Manufacturing PMI later this Monday and culminates with the closely watched US monthly Nonfarm Payrolls report on Friday.

USD/JPY constructive setup suggests that corrective pullback is likely to be bought into

The 200-period Simple Moving Average (SMA) continues to rise, and the USD/JPY pair holds above it, reinforcing a bullish bias. The Moving Average Convergence Divergence (MACD) line stands above its Signal line and sits marginally in positive territory, with the histogram edging higher, which hints at strengthening momentum. The 200-period SMA at 156.04 serves as immediate dynamic support.

RSI at 64.83 remains bullish without overbought conditions, reinforcing the upward tone. Momentum would persist while the USD/JPY pair stays above the rising 200-SMA, and a close beneath it could shift the bias toward consolidation.

(The technical analysis of this story was written with the help of an AI tool)