USD/JPY is entering a critical juncture as the multi-month uptrend collides with a shifting macro backdrop. With U.S. 10-year Treasury yields retreating toward 4.0% and markets increasingly pricing a December Fed rate cut, the dollar’s yield advantage over the yen is starting to erode. At the same time, the Bank of Japan is signaling growing discomfort with persistent yen weakness and above-target inflation, keeping markets alert to both a policy shift and the risk of renewed FX intervention. Technically, price action around the 155.00 – 157.00 zone shows signs of exhaustion, with repeated failures to sustain moves toward 160.00 and momentum indicators rolling over from elevated levels. Together, these factors create a compelling A+ grade opportunity to tactically sell rallies in USD/JPY while the pair trades beneath key resistance. USDJPY Trade Setup: Pair Bias & Entries Stop / Invalidation Targets Why A+ (Fundamentals, Technicals, Sentiment/Positioning) Near-term catalysts (UK time) USD/JPY 156.22 SHORT bias – Prefer fade spikes into 156.80 – 157.50 (thin holiday liquidity, US data headlines) and optionally add on a clean break below 155.50 (prior intraday support). Hard invalidation: Daily close above 158.50, a sustained break into the MoF “danger zone” suggests markets are looking through BoJ hike risk and/or intervention chatter. TP1: 154.00 (recent congestion and likely stop pocket for late longs). TP2: 152.50 (August swing area / 50-day region). Stretch: 150.00 if BoJ or MoF delivers a hawkish surprise. Fundamentals: are very JPY-positive / USD-negative Markets price an 85% chance of a Fed cut in December following weak US retail sales, consumer confidence and PPI; 10-year USTs sit near 4.0%, well off recent highs, compressing the USD-JPY rate differential. BoJ is preparing markets for a potential rate hike as soon as December, with Tokyo CPI well above the 2% target, narrowing the expected policy gap and raises odds of MoF/BoJ coordination to cap yen weakness around 158 – 160. Technicals: • Pair is near the underside of a multi-month rising channel; several analyses flag 155 – 156 as trend-line/MA support now being tested, with a close below 155.5 opening 152- 150. (Economies.com) Repeated intraday failures above 157 – 158 over recent weeks suggest a maturing up-trend and building double-top risk below 160. Sentiment: Options / leveraged funds heavily positioned for carry-long USDJPY toward 160; Reuters notes hedge funds using options to bet on further yen weakness and that intervention is a key tail risk. (Reuters) CFTC data show speculators net long JPY futures (short USDJPY), but positioning is far from extreme – there’s room for fresh longs if the trend turns. (Investing.com) Dealer commentary points to large option strikes and stop clusters near 155 (downside) and 158 (upside), a daily close below 155 could trigger a meaningful stop-run lower. Today – Wed 26: US Initial Jobless Claims & Core PCE – 13:30; Trimmed-mean PCE 16:00. Thu 27: Tokyo CPI (headline & core) – 23:30 Chart by TradingView – USDJPY Trade Setup – 26th Nov Conclusion Taken together, the cooling U.S. data pulse, rising expectations of Fed easing, and a more hawkish-leaning BoJ tilt the balance of risks toward a corrective phase lower in USD/JPY from historically stretched levels. The 156.00 – 157.00 region offers an attractive area to initiate or scale into short exposure, with invalidation clearly defined above the recent resistance band and downside potential towards prior support around 154 and 152.50. This setup aligns fundamentals, technical structure, and market positioning, but—as always—trade sizing and risk limits should reflect individual circumstances and the possibility of surprise headlines from central banks or policymakers. For now, we view USD/JPY as a high-conviction candidate for mean reversion within an increasingly fragile late-cycle dollar environment. This analysis is for informational purposes only and does not constitute investment advice. Trading involves risk; manage exposure accordingly. For similar FX Trade Setups please visit our FX Trade Ideas page. Please visit our Disclaimer page. Disclaimer Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. 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