The foreign exchange market is witnessing a particularly enigmatic performance from the Japanese yen recentlyIt appears that the currency's fate hangs precariously on the policy decisions anticipated from the Federal Reserve and the Bank of JapanThe actions of these two significant central banks may very well emerge as crucial forces that dictate the yen's trajectory, thereby profoundly impacting both the global forex landscape and investor decisions.

The reluctance of the yen to attract persistent buying pressure can largely be attributed to prevailing market sentiments that the Bank of Japan will maintain its interest rates during the forthcoming December meetingOn the flip side, expectations of a more cautious stance from the Federal Reserve, including a delay in interest rate cuts, have kept U.STreasury yields at elevated levels, which further diminishes the appeal of the low-yielding yen.

However, it seems unlikely that short-sellers will make substantial bets against the yen at this juncture

Instead, many are choosing to adopt a wait-and-see approach ahead of the key central bank eventsWith the Federal Reserve set to announce its interest rate decision this Thursday, alongside the Bank of Japan's policy update on the same day, ongoing geopolitical risks, global trade concerns, and risk sentiment may provide the yen with some support, consequently limiting the upside for the dollar/yen pair.

The doubts surrounding the Bank of Japan's plans for interest rate hikes are contributing to a lack of allure for the yen.

Recent data released by Japan's Ministry of Finance revealed an unexpected improvement in the nation's trade deficit for November, which narrowed to 117.6 billion yen, significantly lower than October's figure of 462.1 billion yenThis positive shift was primarily driven by robust export growth—November exports increased by 3.8% year-on-year, buoyed by a weaker yen and a rebound in demand from major trading partners such as the United States

Yet, a year-on-year decline in imports by 3.8% has somewhat tempered the favorable impact of the trade dataMeanwhile, the market generally anticipates that the Bank of Japan will maintain its interest rate at current levels this week, which has elicited new selling interest in the yen, adding further pressure.

In addition, the United States recently released strong retail sales figures for November, demonstrating economic resilienceAccording to a report from the U.SDepartment of Commerce, November retail sales climbed by 0.7% month-on-month, surpassing the previous month's growth of 0.5%. However, when excluding automotive sales, retail sales fell short of expectations, posting a growth of just 0.2%. This data propelled U.S10-year Treasury yields to their highest levels since November 22, reinforcing market expectations of robust economic growth in the U.S.

While market speculation surrounding a third rate cut from the Federal Reserve of 25 basis points this Thursday is limited, the progress towards bringing inflation back to the Fed's 2% target has prompted speculation that the central bank may adopt a more cautious stance at its January policy meeting, potentially pausing the rate-cutting cycle

Thus, investors are keenly focused on the Fed's latest economic forecasts, including the dot plot, as well as Chairman Powell's comments during the news conference, seeking clues about the future trajectory of interest rates.

Following this, market attention will swiftly pivot towards Thursday's critical policy decision by the Bank of JapanThe stance and outcomes of the central bank’s deliberations are expected to provide new directional guidance for the dollar/yen exchange rate, further influencing market expectations regarding the yen's performance.

From a technical analysis perspective, analysts have rendered the following insights:

On the technical front, the combination of buying on dips and a previous breakout above the significant 200-day moving average is benefiting bullish traders

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Moreover, oscillators on the daily chart continue to gain upward momentum and remain distant from overbought territory, signaling minimal resistance for the dollar/yen's upward pathNevertheless, any further upward movement is likely to encounter resistance near the 154.00 level, with subsequent levels of concern situated between 154.45 and 154.50, indicative of a three-week highA sustained breach above these resistance zones would pave the way for a return to the psychological 155.00 mark, with further upward targets set at 155.50.

On the downside, the area around 153.15 (the overnight low) appears to represent short-term supportShould a breach occur beneath the 153.00 threshold, the dollar/yen pair may retrace towards the 200-day moving average support zone, currently situated around 152.15. Should this support hold fail, market sentiment could shift toward a bearish outlook, potentially accelerating declines in the currency pair, with targets set at the round number of 151.00, and even reaching the psychological barrier of 150.00.

In conclusion, the HTFX trading platform suggests that for investors, the current ambiguity in the yen's trajectory—dependent on decisions from the Federal Reserve and the Bank of Japan—presents a landscape replete with both risks and opportunities