USD/JPY experienced sharp back-and-forth trading on Wednesday, with the pair moving between 154.90 and 156.24 amid speculation over President-elect Trump’s trade policies. An early dip followed expectations of a softer trade stance, but the pair rallied after Trump announced 25% tariffs on Mexico and Canada starting February 1. The surge faded later in the session as longs unwound positions, leaving USD/JPY near its 55-day moving average at 154.78. Large option expiries, including $2.6 billion between 155.95-156.05, likely influenced the pair’s erratic moves.

Technical signals point to consolidation near key levels. Resistance is seen at 156.08, the descending 100-hour moving average, with further barriers at the session high of 156.24 and option-related levels near 156.45-156.50. Support lies at 154.78, reinforced by the 55-day moving average, with additional protection at 154.45, the December 19 low. A break below 154.45 could deepen losses, while a move above 156.08 is needed to reestablish bullish momentum.

Yen crosses remained under pressure, with EUR/JPY falling into its daily Ichimoku cloud and GBP/JPY and AUD/JPY retreating from resistance levels. Narrowing JGB-U.S. Treasury spreads also weighed on USD/JPY, with 2-year and 10-year differentials well below recent highs. Markets are looking ahead to Friday’s BOJ policy decision, where a rate hike is increasingly anticipated. A hawkish BOJ stance could strengthen the yen further, keeping USD/JPY under pressure and limiting upside potential.