USDJPY Trade Setup – 5th Dec

USD/JPY enters the new week at a pivotal inflection point, with price action increasingly sensitive to U.S. rate expectations and the evolving Fed / BoJ policy divergence. After consolidating around the mid-154.00s, the pair appears vulnerable to a volatility expansion as markets position for key central bank risk and potential shifts in yield differentials. With U.S. 10-year yields stabilising near recent ranges and the dollar showing signs of fatigue, the near-term balance of risk increasingly favours downside continuation. From a macro perspective, a dovish tilt from the Federal Reserve would likely compress U.S.–Japan rate spreads further, while persistent speculation around a tightening bias from the Bank of Japan keeps the yen’s upside optionality firmly in play. This creates a high-conviction environment for a tactical bearish USD/JPY setup, particularly if rallies attract supply into well-defined resistance and stop-rich zones. USDJPY Trade Setup: Pair / Asset Bias & Entries Stop / Invalidation Targets Why A+ (fundamentals, Technicals, Sentiment) Near-term catalysts (UK time) USD/JPY SHORT – Bearish bias –  Sell rallies 154.80 – 155.30 or add on a clean break below 153.80. 156.10 daily close T1: 152.00  T2: 150.50 Fundamentals: Fed cut is strongly priced for Dec 9 – 10, pressuring US yields and the dollar. JPY tailwind: markets increasingly price a BoJ hike at the Dec 18 – 19 meeting, and Japan yields have surged, tightening the differential narrative. (The Wall Street Journal)   Technicals: 155.00 area looks like a volatile supply / stop zone; a dovish Fed could trigger a fast air-pocket move lower. Sentiment: risk of crowded carry unwinds if US yields slip post-Fed. (Reuters) Wed 10 Dec: FOMC statement at 19:00 UK time. Powell speech at 19:30 UK time. Chart by TradingView – USDJPY Trade Setup – 5th Dec Conclusion The tactical view for USD/JPY remains bearish while price holds below key resistance, with the trade thesis anchored on a potential catalyst-driven decline in U.S. yields and a renewed momentum shift in favour of the yen. The setup offers attractive asymmetry: limited invalidation above resistance versus meaningful downside potential if policy messaging or rate expectations turn more supportive for JPY. A disciplined approach, selling rallies into defined supply or adding on a confirmed breakdown, keeps risk contained while allowing participation in a larger repricing move. As always, execution should remain event-aware and volatility-adjusted. A hawkish surprise or a sharp rebound in U.S. yields would weaken the bearish case and could trigger a fast squeeze higher. However, unless that scenario materialises, USD/JPY appears positioned for a lower-high-to-breakdown sequence, with downside targets increasingly achievable as the market navigates a policy-heavy week. 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. TerraBullMarkets.com does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets or any financial instrument involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TerraBullMarkets.com nor any of its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page. TerraBullMarkets.com and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. TerraBullMarkets.com and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted. The author and TerraBullMarkets.com are not registered investment advisors and nothing in this article is intended to be investment advice. TerraBullMarkets...