• The yen lost around 10% of its value in 2024.

• Analysts believe Trump’s administration will boost the economy and reheat price pressures.

• BoJ officials will wait to see the impact of Trump’s policies.

The USD/JPY outlook suggests some relief for the yen at the start of the year as the greenback eases. However, the outlook for the yen remains dim due to expectations of fewer rate cuts in the US. At the same time, the outlook for Bank of Japan rate hikes is uncertain, leaving Japan’s currency vulnerable in 2025.

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The yen lost around 10% of its value in 2024, mainly due to the wide gap in interest rates between the US and Japan. Towards the end of the year, there was hope that the Fed would cut rates and the Bank of Japan would hike them. However, this changed when Trump won the election. Suddenly, the outlook for Fed rate cuts changed, and the Bank of Japan assumed a cautious stance. 

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Trump will take office in January. His policy proposals last year caused a shift in sentiment regarding the US economy and inflation. Analysts believe his administration will boost the economy and reheat price pressures. As a result, the Fed downgraded its forecast for rate cuts in 2025, raising the greenback. 

Meanwhile, BoJ policymakers took the cautious route, failing to give clear guidance for rate hikes this year. Officials will likely wait to see the impact of Trump’s policies.

USD/JPY key events today

USD/JPY technical outlook: SMA break shows stronger bears

On the technical side, the USD/JPY price trades slightly below the 30-SMA, showing that bears are in the lead. This move came after the uptrend paused at the 158.02 resistance level. Initially, bulls had solid momentum that kept the price above the 30-SMA and the RSI above 50. 

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However, the 158.0 resistance created a solid barrier that allowed bears to resurface. A second attempt by bulls to break above the level was weak, as the price made small-bodied candles. 

Moreover, the RSI made a bearish divergence with the price, which indicated a decline in bullish momentum. As a result, the price broke below the 30-SMA to retest the 156.03 support level. However, bears must break below 156.03 to make a lower low and confirm a trend reversal. This would allow bears to reach the 153.02 support level.

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