USD/JPY Dips After Dovish Fed Signal as BoJ Hike Looms; EUR/USD Clears 1.1700

Introduction

This session’s market moves were driven by mixed US macro data and a dovish Federal Reserve, prompting fresh opportunities in major FX pairs. US initial jobless claims rose to 236,000 (week ending Dec 6) and the Fed lowered the funds rate by 25bp to 3.50–3.75%, with Chair Powell signaling a "wait-and-see" stance. At the same time, the Bank of Japan is widely expected to lift policy rates from 0.50% to 0.75% next week — a combination that has produced divergent near-term outcomes for USD/JPY and EUR/USD.

Market snapshot

Key datapoints moving markets today:

- US initial jobless claims: 236,000 (weaker than consensus 220,000).

- Federal Reserve: 25bp cut to 3.50–3.75%; dovish commentary from Chair Powell.

- Bank of Japan: widely expected to raise policy rate (0.50% → 0.75%) next week; Japan’s reflationary fiscal plan under PM Takaichi remains a material upside risk for domestic inflation and bond yields.

Why USD/JPY and EUR/USD moved

Weaker US labor data plus the Fed’s rate cut reduced US yield support for the dollar, creating immediate downside pressure on USD/JPY. At the same time, expectations of a BoJ rate increase and Japan’s fiscal reflation plan complicate the trend — a BoJ tightening should strengthen the yen further but heavy fiscal stimulus could at times weaken it if markets expect currency intervention or divergent real rates.

USD/JPY — Technical and trade outlook

Sentiment: Short-term bearish for USD/JPY after the dovish Fed and weaker US jobs print. Current market level around ~155.6 (session reference) is a focal point for short setups.

Opportunities:

- Short USD/JPY on follow-through selling below 155.6 with near-term targets inside the 152–154 area if momentum extends.

- Consider scaling into positions on intraday retracements and using a break-and-hold below the session low as confirmation.

Risks:

- BoJ rate hike next week could accelerate yen strength, amplifying a downside move; conversely, large fiscal reflation or explicit currency intervention could reverse gains for JPY.

Suggested trade plan (example risk framework):

- Entry: short below 155.6 on a clean close; alternative: short on retracement toward 156.2–156.8 if momentum softens.

- Initial target: 154.0–152.0; extended target: 150.0 if macro flows accelerate yen demand.

- Stop-loss: a protective stop above 157.5–158.0 (adjust for account risk and time frame).

EUR/USD — Momentum setup

EUR/USD cleared the 1.1600–1.1650 range and pushed above 1.1700 on weakening USD momentum and supportive euro flows. RSI showed bullish momentum with an immediate upside target near 1.1800 and support clustering around 1.1700 and the 100-day SMA (1.1641).

Opportunities:

- Momentum longs targeting 1.1800 on continued USD weakness; pullbacks toward 1.1700–1.1641 can be used for entries with tight risk controls.

Risks:

- A surprise hawkish Fed communication or stronger-than-expected US data would likely trigger a quick USD recovery and push EUR/USD back toward the 1.1641–1.1600 band. Also monitor RSI for overextension and short-term pullbacks.

Positioning, risk management, and catalysts to watch

Short-term traders should keep positions size disciplined and be responsive to fast-moving macro headlines. Major catalysts that could change directional bias include:

- BoJ policy decision and any accompanying guidance or intervention language.

- US payrolls and incoming labor-market prints that would reprice Fed expectations.

- Japan’s fiscal announcements under PM Takaichi that impact reflation expectations and sovereign issuance.

How automated tools and strategies can help

In volatile macro regimes, automated trading and algorithmic rule-sets can reduce emotional decision-making and help execute on predefined risk parameters. For forex trading, pre-programmed entries, stops, and scaling rules make it easier to capture short-term breakouts in EUR/USD or manage mean-reversion and breakout strategies in USD/JPY. Retail traders who use automated trading tools may find that backtested rules and continuous market monitoring improve execution and consistency.

If you trade multiple markets, combining macro-aware strategy rules with automated execution helps you respond quickly to events such as rate decisions or surprise data releases. Learn more about automated options for FX on the Forex Trading Bot page and the Trade Assistant Bot for multi-market execution.

Conclusion

Today’s weaker US jobs print and the Fed’s 25bp cut pushed the dollar softer, creating near-term short opportunities in USD/JPY and a momentum breakout in EUR/USD above 1.1700. Traders should balance short-term setups with the risk of a BoJ rate move or fiscal-driven yen volatility. Use strict risk controls, watch the upcoming BoJ decision and US data, and consider automated trading to enforce discipline and execution.

For traders wanting to test systematic approaches, PlayOnBit offers tools that support automated trading across asset classes — from forex trading to crypto trading. Explore options such as the Forex Trading Bot and the platform at PlayOnBit to experiment with rule-based setups. Try an AI trading bot today to combine macro signals with consistent execution and reduce emotional risk in fast-moving markets.