USD/JPY slips below 100 EMA as yen strength challenges January upside momentum

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Highlights

USD/JPY slips to 158 after jobless claims boost fails to hold upside
Break below hourly 100 EMA shifts momentum as price tests weekly opening level
Political risk in Japan could trigger renewed upside if a snap election triggers stimulus bets

However, that bullish move failed to hold into Friday. During the early Asian hours, the yen regained strength and forced the dollar lower by 0.4%, dragging USD/JPY beneath the 100 EMA on the hourly chart. That breach now puts the pair below all three key intraday moving averages: the 20, 50, and 100 EMAs. The shift reflects a clear change in near-term momentum and raises questions about whether dollar bulls have lost grip heading into the weekend.

USD/JPY price dynamics (Jan 2026). Source: Tradingview

Technical traders are now eyeing the 158 level as a crucial support zone. This is not just the current low, but also the weekly opening price, meaning a close beneath it would trigger a negative weekly return. The zone has attracted buyers so far during Friday’s European session, where the pair hovers around 158.2. However, the pressure remains tilted to the downside after the breakdown of support levels on the hourly timeframe.

USD/JPY still up 1.67% in January despite retracement from 159.45

Despite the technical bearish turn, the broader trend structure still leans toward strength in USD/JPY. The pair has gained 1.67% so far in January, driven largely by yen softness and sustained dollar support on the back of resilient U.S. data. That performance peaked earlier this week at 159.45 before the ongoing retracement.

Japanese politics now re-enter the spotlight. Reports suggest that Prime Minister Takaichi is preparing to dissolve parliament next week and call a snap election. Markets view this as a possible gateway for further fiscal stimulus. If her Liberal Democratic Party secures a majority, it could weigh heavily on the yen and prompt renewed upside in USD/JPY. Traders are already factoring in these expectations in longer-term outlooks.

Recovery above 158.4 could lift USD/JPY back toward 158.8 in the short-term

Looking ahead, the pair must defend 158 on a daily close basis to avoid deeper losses. A sustained break below that level opens the door to 157.6, which would erase January’s gains and flip sentiment toward a bearish start to the year. A strong hourly close back above 158.4 would hint at a recovery attempt toward 159.

The short-term forecast expects the price to rebound off the 158 zone and recover toward 158.8 or higher during the U.S. session. However, a close beneath 158 would confirm a bearish weekly reversal and invite further downside momentum early next week, especially if macro risks tilt in favor of the yen.

In a recent analysis, we discussed how USD/JPY hovered near 158 after a sharp rejection from the 159.45 one-year high. Verbal intervention from Japanese officials stalled yen weakness and capped further upside.

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