Japanese Yen Holds Steady Against USD on BoJ Rate Hike Bets and Fed Policy Expectation
The Japanese Yen (JPY) maintains the intraday gains against the US Dollar (USD) as investors await the policy decision of the Federal Reserve (Fed). Support for the JPY comes from expectations of further interest rate hikes by the Bank of Japan (BoJ) and a narrowing US-Japan yield differential driven by declining US Treasury bond yields. Meanwhile, worries over US President Donald Trump’s trade policies and a positive risk sentiment may cap JPY’s upside. Market participants expect a dovish Fed stance, with the possibility of rate cuts later in the year. The USD/JPY pair faces key resistance near 156.60-156.70, while the 155.00 psychological level serves as immediate downside support. The event from the Fed will probably drive USDJPY’s direction in the short run. KEY LOOKOUTS • USD/JPY will remain capped due to further monetary policy tightening at hand at the Bank of Japan. • Investors await the result of the Federal Reserve’s two-day meeting that should highly determine price action for the USD and, therefore, the moves for USD/JPY. • Softening US Treasury yields continue to compress the yield gap, making the lower-yielding Yen more favorable and capping on USD gains. • Fresh tariff threats by Donald Trump are likely to lift inflation concerns that impact Fed rate expectations, creating volatility in currency markets. Japanese Yen remains firm against the US Dollar as trading attention shifts to key economic events and policy decisions. Market players are expecting the BoJ to hike the rates further. The wage negotiation is strong and monetary policy adjustment is cautious. The Federal Reserve’s two-day meeting is highly awaited since the expectations of a possible rate cut later this year are influencing USD dynamics. Besides, the yield differential between the US and Japan has narrowed further due to the decrease in US Treasury yields, strengthening the Yen. However, concerns over US President Donald Trump’s proposed tariffs and their inflationary impact could inject volatility into the USD/JPY pair, making the Fed’s stance a crucial factor in the currency’s near-term direction. The Japanese Yen holds its ground against the US Dollar amid BoJ rate hike expectations and a narrowing US-Japan yield differential. Traders await the Fed’s policy decision, which could shape USD/JPY’s direction. Meanwhile, Trump’s trade policies add uncertainty, influencing market sentiment and currency volatility. • Traders anticipate further interest rate hikes from the Bank of Japan, supporting the Yen. • The outcome of the Federal Reserve’s meeting will be very crucial for the movement of USD/JPY. • The decline in US Treasury yields has narrowed the gap, and the lower-yielding Yen is in favor. • Market participants believe that the Fed will cut borrowing costs twice before the end of the year. • Fresh tariff threats on key imports could impact inflation and USD strength. • Resistance for USD/JPY is seen near 156.60-156.70, and further upside is capped at 157.45-158.00. • The psychological level at 155.00 is acting as support and then 154.50 and 153.70. The Japanese Yen is gaining ground against the US Dollar as traders are positioning ahead of the Federal Reserve’s policy decision. Expectations of further interest rate hikes by the Bank of Japan (BoJ), due to strong wage growth and cautious monetary adjustments, have strengthened the Yen. The decline in US Treasury bond yields has also brought the US-Japan yield differential closer, making the lower-yielding JPY more appealing to investors. However, risk-on sentiment in global markets and traders’ aversion to making aggressive bets before the FOMC meeting have capped further gains for the Yen. USD/JPY Daily Chart TradingView Prepared by ELLYANA Meanwhile, the US Dollar remains pressured due to growing speculation that the Federal Reserve is going to be dovish and cut rates further later in the year. US President Donald Trump’s tariff threats on computer chips, pharmaceuticals, and metals in recent weeks also add market uncertainty as that threatens to potentially inject inflation into the economy. The USD/JPY pair is currently ranging near the 155.00 psychological level, with some resistance near 156.60-156.70 and further upside potential capped at 157.45-158.00. The key supports at 154.50 and 153.70 will come into play if bearish momentum increases. Traders are now awaiting the Fed’s decision, which will significantly decide the further move for the USD/JPY pair. TECHNICAL ANALYSIS Technically, the USD/JPY pair has broken below a multi-month ascending channel, favoring a bearish outlook. The 155.00 psychological mark is immediate support, followed by key levels at 154.50 and 153.70. A sustained break below these zones could accelerate the downside move toward the 153.30 and 153.00 levels. On the upside, resistance is seen at 156.60-156.70, with further selling pressure expected near 157.45. A breakout above 157.00 may lead to a short-covering rally to take the pair as high as 158.00 and the multi-month top of 158.85-158.90. In addition, the daily chart is showing slightly negative oscillators; thus, until the Fed’s decision alters the trend in the markets, the trend might continue its downward trajectory. FORECAST If the Fed decides to raise its interest rates or indicates an extended period for cutting rates, then the USD/JPY can once again experience an upward swing. A break above the resistance zone of 156.60-156.70 may trigger a short-covering affair, with the buyers targeting the 157.45 level. Further bullish momentum is seen taking this pair toward 158.00, and sustained may retest the multi-month high of 158.85-158.90. However, for an extended rally, strong economic data from the US and rising Treasury yields would be necessary to attract fresh buying interest in the USD. On the flip side, if the Federal Reserve indicates a dovish policy shift or focuses on possible rate cuts, the US Dollar may weaken, and this would push USD/JPY down. A convincing break below the 155.00 psychological mark may reveal the 154.50-154.55 support area. More downside force may accelerate the fall to 153.70, with a deeper fall focusing on 153.30 and 153.00. Stronger expectations of BoJ rate hikes, with narrowing US-Japan yield differentials, should keep the Yen supported, supporting a bearish view for the USD/JPY pair.