USDJPY Trade Setup – 1st Dec

USD/JPY enters the week at elevated levels around 155.50, but the balance of risks is shifting decisively in favor of yen strength. After years of ultra-easy policy, the Bank of Japan is now openly debating further rate hikes and tolerating higher domestic yields, while the Federal Reserve approaches the later stages of its own easing cycle. This evolving policy convergence is steadily eroding the yield advantage that has underpinned the long-standing carry trade in USD/JPY. At the same time, price action is starting to confirm the macro turn. The pair has failed to sustain moves toward the prior highs near 158.00 and is rolling over from a well-defined resistance zone, with momentum indicators showing loss of upside steam and early signs of distribution. Positioning remains crowded in favor of USD longs and JPY shorts, leaving the market vulnerable to an unwind if incoming US data disappoints or if the BoJ guidance tilts further hawkish. Against this backdrop, we see rallies into resistance as an opportunity to establish high-conviction short exposure, with clearly defined invalidation above the recent tops and attractive downside toward prior support zones in the low-150s. USDJPY Trade Setup: Pair Bias & Entries Stop / Invalidation Targets Why A+ (Fundamentals, Technicals, Sentiment) Near-term catalysts (UK time) USD/JPY 155.55 SHORT – Sell rallies. Prefer 156.0 – 156.5 (retests of Asia breakdown / prior resistance). Optional add on a clean 1H close back below 155.0 after a bounce. Hard stop 157.6, or daily close above 157.2 (rejects the BoJ-shift narrative and reopens highs). T1: 153.0 T2: 151.8 – 152.0  Fundamentals: BoJ Gov. Ueda has just said the Dec 18 – 19 meeting will weigh the “pros and cons” of a hike, and markets now price a clear chance of tightening; 2-yr JGBs are 1% and 10-yr 1.87%, the highest since 2008. Meanwhile the Fed is in blackout ahead of a meeting where markets see a high probability of another cut and the US 10-yr sits near 4%. Yield-spread support for USD/JPY is shrinking, not widening. Technicals: Pair failed ahead of 158.00 and has rolled over; 155.00 is a well-flagged pivot/neckline, with technicians eyeing 152.80 & 152.10 (50-day SMA) on a break.  Sentiment: CFTC and street color still show heavy speculative short-JPY / long-USD carry and strong positive correlation with the Nikkei; today’s 2% Nikkei drop and JPY strength show the carry starting to unwind, with stops clustered under 155.00 & 153.00 Mon 1 Dec: Final manuf. PMIs  US ISM manufacturing 15:00  Tue 2: US JOLTS 15:00. Wed 3: ADP 13:15, ISM services 15:00.  Chart by TradingView – USDJPY Trade Setup – 1st Dec 2025 Conclusion In summary, USD/JPY now offers a rare alignment of fundamentals, technicals and sentiment that justifies an A+ short bias for tactical traders and swing participants alike. The macro story is turning against the dollar as US yields stall and BoJ normalization gathers credibility; the chart structure shows a maturing uptrend with clean resistance to lean against; and speculative positioning remains skewed in a way that could accelerate any downside move via stop-driven liquidation. We therefore favor selling strength into the 156.00 – 156.50 area, protecting the trade with a disciplined invalidation above recent highs, and targeting a re-test of key support levels around 153.00 and 151.80. As always, execution should be sized appropriately to account for event risk and volatility around upcoming US data and BoJ communications, but we view any orderly bounce into resistance as an opportunity to participate in what could be the early stages of a more meaningful medium-term correction lower in USD/JPY. This analysis is for informational purposes only and does not constitute investment advice. Trading involves risk; manage exposure accordingly. 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