USD/JPY rebounded modestly on Wednesday after touching a four-week low of 155.93 on EBS, pressured by a weaker dollar following a below-forecast U.S. CPI report. Treasury yields fell further, with 2-year yields at 4.27%, undoing gains since the payrolls report, while rising expectations for a January BOJ rate hike added to yen strength. Recent comments from BOJ officials highlighting wage growth and elevated import costs, coupled with Finance Minister Kato’s remarks on yen volatility, have fueled speculation that policy tightening is imminent.

The technical outlook shows USD/JPY at a critical juncture. Support is solid near the lower 21-day Bollinger Band at 155.86, with the psychological 155 level providing further downside protection. Resistance levels include the 21-day moving average at 157.16, the 157.20-40 congestion zone, and the session high at 158.08. A sustained break below 155.86 would signal additional downside, potentially targeting the 154.50 area. Conversely, a move above 158.08 could reignite bullish momentum, setting the stage for a test of higher resistance levels.

Traders are eyeing economic data and geopolitical risks for near-term direction. Thursday’s Japan corporate goods prices and U.S. jobless claims will offer fresh insights into inflation and labor market dynamics. Additionally, one-week option skews highlight demand for yen calls ahead of Monday’s U.S. inauguration, reflecting market caution over potential policy shifts. Until a clear breakout from the 155.81–158.80 Bollinger Band range occurs, USD/JPY is likely to trade with a cautious bias, with yen strength through crosses remaining a preferred strategy amid rate differential dynamics.