Yen Steadies as BOJ Hikes Rates; Gold Eyes 2,800$

Key Events Next Week:

FOMC Meeting (Wednesday)
US Advance GDP (Thursday)
Tokyo Core CPI (Friday)
US Core PCE (Friday)

BOJ Policies and USDJPY Reaction

The Yen’s reaction to the BOJ’s recent policies has been more measured compared to its movement in July 2024, following a 25bps rate hike. In 2025, the market preemptively priced in the hike, causing USDJPY to retrace nearly 2.5% from its 159-peak to the 154-price zone. Currently, the USDJPY pair is testing critical support levels, with a move below 153.60 necessary to confirm further downside momentum.

The BOJ’s rate hike, alongside its stance on wage growth, inflation aligning with the government’s 2% target, and Japan's moderately recovering economy, has provided some stabilization. However, the influence of external factors such as the upcoming FOMC meeting and market uncertainties surrounding Trump-driven policies may dictate the next significant move.

Gold Eyes Record Highs

Gold’s breakout above the $2,730 level has raised hopes for a retest of its all-time high at $2,790, with the psychological $2,800 barrier acting as a key level. The metal continues to benefit from safe-haven demand amid inflation hedging, trade war tensions, and geopolitical risks.

However, potential resolutions or agreements in ongoing global negotiations could ease market fears, paving the way for a retracement and consolidation in gold prices.

Technical Analysis: Quantifying Uncertainties

USDJPY Forecast: 3-Day Time Frame – Log Scale

Source: Tadingview

The USDJPY pair is retesting the lower boundary of its primary uptrend channel, formed by consecutive lows between January 2023 and December 2023. The 153.60 support level serves as the dividing line between bullish and bearish sentiment.

Bearish Scenario:
A break below 153.60 could lead to further declines, targeting levels around 151.60, 149.50, and 147, corresponding to the 0.382, 0.5, and 0.618 Fibonacci retracement levels of the uptrend from September 2024 to January 2025.
Bullish Scenario:
Should the pair hold above the 154 level and regain momentum, resistance levels at 159 and 160 may come into play, though risks of BOJ intervention and heightened volatility remain high.

Gold Forecast: 3-Day Time Frame – Log Scale

Source: Tradingview

Gold has successfully broken out above its ascending triangle pattern, which had extended from November 2024 to January 2025. This breakout positions gold to retest its all-time high at $2,790, with the triangle’s breakout target projecting a move towards $2,920, contingent on a firm break above $2,800.

Downside Risks:
If gold fails to sustain its upward momentum or reach new highs, a reversal could see it test the critical $2,730 support level. Further downside levels align with Fibonacci retracement levels of the October 2023 to October 2024 trend, targeting $2,630, $2,520, $2,420, and, in extreme cases, $2,300.
Long-Term Outlook:
While long-term forecasts for gold remain bullish, short-term volatility risks persist, influenced by macroeconomic factors and geopolitical developments.

Written by Razan Hilal, CMT

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