Yen gets glimpse of choppy trading ahead

Friday’s price action could provide a glimpse of what to expect in USD/JPY trading in 2025.

The pair surged following reports of a phone conversation between US President-elect Donald Trump and Chinese President Xi Jinping. The discussion was described by Trump as “a very good one for both China and the USA.”

Markets are likely to focus on headlines after Trump’s inauguration on Monday, as key decisions will increasingly come from the top. This could result in choppy markets, though the expectation that agreements will eventually be reached might limit significant volatility and weaken the yen as risk tone improves.

Yen traders, in particular, may choose to capture moves in USD or CNH until US-Japan relations take center stage. Reports indicate that Japanese Prime Minister Shigeru Ishiba could visit the US as early as the first half of February, though a meeting with Trump has not been confirmed.

USD/JPY posted a session high of 156.20 following the Xi-Trump headline though modest turnover prevented a break of 156.53, relieving bearish pressure from a series of lower highs and lower lows. Large option expiries near 156.95-157.05 and concerns over potential intervention above 158 could also hinder further gains.If USD/JPY fails to extend higher, it risks falling back below the key 155 psychological level. Further declines could test the 38.2% Fibonacci retracement of its December to January rise at 154.97, the 55-day moving average at 154.66, the Dec. 19 low at 154.45, and an ascending trend line from the September low near 154.08.

(Robert Fullem is a Reuters market analyst. The views expressed are his own.)