Original article by: Christopher Lewis, DailyForex
Source: https://www.dailyforex.com/forex-technical-analysis/2025/12/usdjpy-forecast-18-december-2025/238664
USD/JPY Forecast: December 18, 2025
The USD/JPY currency pair continues to show a strong bullish trend, and traders are closely watching several technical levels to determine potential areas of support and resistance. As the year draws to a close, liquidity is beginning to wane heading into the holiday season, but the pair still displays signs of underlying strength. In this updated forecast, we will explore the current technical outlook, key levels to focus on, and external macroeconomic factors that may influence price movement.
Technical Overview:
The overall trend in USD/JPY remains positive, with the pair sustaining its upward momentum through mid-December. The Japanese yen has remained under pressure, fueled by divergent monetary policies between the Bank of Japan and the Federal Reserve.
– The pair is consolidating just below the key 147.33 resistance zone, which was tested twice in the last trading sessions.
– A break above this level would likely open the door for further gains toward the next resistance at 148.50.
– On the downside, support can be found near the 146.00 level, with additional support at 144.70, a level that corresponds with a prior breakout zone from November.
Key Technical Indicators:
– The market remains above the 50-day Exponential Moving Average (EMA), signaling continued bullish sentiment.
– Relative Strength Index (RSI) remains near the 60 level, suggesting there is still room for further upward movement before overbought territory is reached.
– Moving Average Convergence Divergence (MACD) histogram continues to print positive values, supporting upward momentum.
Price Action Analysis:
The USD/JPY is maintaining higher highs and higher lows on the daily chart. This price structure is typically associated with strong trend behavior and suggests minimal likelihood of a reversal at this time unless some fundamental shift alters market sentiment.
– Recent pullbacks have been shallow and have provided opportunities for buying dips into uptrend support zones.
– The bullish price structure indicates that buyers continue to step in during moments of weakness, particularly near significant support.
– The market remains focused on upcoming US economic data, which could further strengthen the dollar.
Fundamental Drivers:
Several key economic themes are shaping the direction of USD/JPY. These include interest rate expectations, monetary policy divergence, inflation data, and projected changes in risk sentiment going into 2026.
1. Divergent Central Bank Policies:
– The Federal Reserve has maintained a relatively hawkish tone, emphasizing a data-dependent approach but not ruling out further rate hikes if inflation proves persistent.
– Conversely, the Bank of Japan continues to adhere to its ultra-loose monetary policy, keeping interest rates below zero and sustaining yield curve control measures.
– This policy gap continues to weaken the yen and support USD strength.
2. US Treasury Yields:
– Rising yields, particularly in the 10-year and 30-year durations, enhance the appeal of the US dollar over currencies like the yen.
– Japan’s bond yields have remained largely suppressed due to central bank intervention, creating a yield differential that encourages carry trade flows into USD/JPY.
3. Risk Sentiment and Global Markets:
– The shift in investor sentiment toward riskier assets has weighed slightly on the yen’s safe-haven appeal.
– Optimistic outlooks for global economic expansion in 2026 have further encouraged investors to move away from low-yielding currencies like the yen.
4. Inflation Trends:
– Inflation in Japan has remained consistently below the central bank’s target, which is another reason why the BOJ has remained dovish.
– In contrast, US inflation is showing signs of stabilizing but remains elevated enough to justify tighter monetary policy.
Key Levels to Watch:
Support Levels:
– 146.00
Explore this further here: USD/JPY trading.