USD/JPY breaks above 156 as BoJ policy expectations shift to gradual hikes

USD/JPY surged 0.5% to trade above 156.20 during Asian trading, marking a significant resistance breach as Bank of Japan rate hike expectations moderate. Japan's Services PMI jumped to an 11-month high of 53.8, signaling robust economic expansion despite Nomura's forecast of BoJ rates reaching only 1.5% by 2027. The dollar found additional support from steady Fed rate expectations, with markets maintaining current pricing despite speculation about potential Warsh appointment. China's Services PMI improvement to a three-month high and South Korea's won strength from pension fund dollar bond considerations added regional complexity. Technical indicators show USD/JPY breaking above the 156 psychological level with momentum indicators suggesting further upside potential. Immediate resistance sits at 156.50, while support has formed at 155.80. Traders should monitor upcoming BoJ communications for any hawkish surprises that could cap further yen weakness.