USD/JPY Price Forecast: Remains below 160.00 intervention threshold ahead of Fed

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USD/JPY bulls turn cautious as hawkish BoJ and intervention fears offer some support to the JPY.
The US-Iran stalemate continues to underpin the safe-haven JPY and act as a tailwind for the pair.
Bulls await a sustained move beyond 160.00 before placing fresh bets ahead of the Fed decision.

The USD/JPY pair struggles to capitalize on the previous day's goodish rebound from sub-159.00 levels, touched in reaction to the Bank of Japan's (BoJ) hawkish pause, and oscillates in a range during the Asian session on Wednesday. Spot prices hold steady above the 159.50 region as traders look to the crucial FOMC decision for some meaningful impetus amid mixed cues.

Heading into the key central bank event risk, the uncertainty over US-Iran peace talks continues to act as a tailwind for the safe-haven US Dollar (USD). Furthermore, economic concerns stemming from continued energy supply disruptions through the Strait of Hormuz undermine the Japanese Yen (JPY) and support the USD/JPY pair. However, intervention fears help limit deeper JPY losses and cap the currency pair.

From a technical perspective, spot prices, barring a few knee-jerk reactions, have been oscillating in a familiar band over the past one-and-a-half months or so. Against the backdrop of a solid rebound from the 200-day Exponential Moving Average (EMA) touched in February, the range-bound price action might still be categorized as a bullish consolidation phase, which backs the case for a further USD/JPY appreciating move.

Meanwhile, the daily Relative Strength Index (RSI) around 56 hints at moderate upside momentum. That said, a slightly negative Moving Average Convergence Divergence (MACD) reading points to some lingering consolidation risk. Mixed momentum oscillators, in turn, make it prudent to wait for a sustained strength and acceptance above the 160.00 psychological mark before traders start placing fresh bullish on the USD/JPY pair.

On the downside, initial support emerges around 159.60 ahead of the 159.00 mark and the 158.50-158.45 horizontal zone, with stronger underlying demand seen at the lower boundary of the trading range below 158.00. A daily close back under the latter would weaken the bullish structure, whereas holding above it keeps the broader uptrend intact and leaves the USD/JPY pair poised to resume gains once the near-term consolidation phase eases.

(The technical analysis of this story was written with the help of an AI tool.)

USD/JPY daily chart

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.