The USD/JPY pair often experiences the most significant volatility among major currency pairs. However, as 2026 begins, it is showing notably weak momentum. The buying pressure that characterized the final quarter is easing as geopolitical turmoil surfaces. Currency traders are now trying to assess the key themes for the year, focusing on potential shifts in global dollar demand and determining whether further yen weakness is still expected or already factored into the price.
2025 is now over, and traders are still reflecting on many themes that generated volatility in the past year. The primary factor is whether recent geopolitical events add buying pressure to the dollar or further fuel de-dollarization.
Indeed, with the US capturing Venezuela’s President Maduro, even with the condemnation of the act from the UN, the US dollar is seeing some demand, particularly against European major currencies.
Signs of a policy shift to reach peace through strength, driven by the most powerful army and economy, are currently having a positive effect on confidence in the greenback.
Despite the dollar broadly strengthening, USD/JPY is not moving significantly, which might indicate hesitancy but also serves as a guide to upcoming action.
When momentum slows down after a significant trend, opportunities arise for either a further breakout or a mean-reversion move.
In the case of today’s Chart of the Week subject, USD/JPY just formed a major double top, but hasn’t seen follow-through to the downside.
Held by its 4H 50- and 200-period moving averages acting as support, the action is consolidating between 156.00 and 157.00.
When action consolidates in this manner while traders await further market and economic clues, it is wise to observe recent peaks and troughs to determine if the price action leads to either an upside or downside breakout.
Failing to break recent boundaries increases the likelihood of range-bound activity.
With monetary policy not expected to change through the upcoming month for either the Federal Reserve or the Bank of Japan, participants will look at inflation data to guide their decision-making and dollar demand expectations – a key theme to look out for in 2026.
With the US Non-Farm Payrolls release on Friday, things could become volatile as the year starts on a high note for the markets.
USD/JPY 4H chart, January 6, 2026. Source: TradingView. Past performance is not indicative of future results.
Resistance levels
- Mini-resistance 157.00 to 157.30
- Double top at 157.89
- 157.90 to 158.90 2025 major resistance
- 2025 extremes 158.87
Support levels
- 156.00 Main pivot
- 156.45 4H 50-period moving average
- 155.00 Minor support
- 154.00 Psychological support
This article is for general information purposes only, not to be considered a recommendation or financial advice. Past performance is not indicative of future results. It is not investment advice or a solution to buy or sell instruments.
Opinions are the authors; not necessarily those of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors.
Leveraged trading in foreign currency contracts or other off-exchange products on margin carries a high level of risk and is not suitable for everyone. We advise you to carefully consider whether trading is appropriate for you in light of your personal circumstances. You may lose more than you invest. We recommend that you seek independent financial advice and ensure you fully understand the risks involved before trading. Trading through an online platform carries additional risks. Losses can exceed deposits.
