USD/JPY Price Forecast: Holds steady above 159.00 as bulls await Fed/BoJ policy updates

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The USD/JPY pair attracts some dip-buying during the Asian session on Tuesday and stalls its modest pullback from the 159.75 area, or the highest level since July 2024, retested the previous day.

USD/JPY regains positive traction following the overnight pullback from the YTD peak.
Intervention fears might cap gains ahead of the Fed, BoJ rate decisions later this week.
The technical setup favors bullish traders and backs the case for further appreciation.

The USD/JPY pair attracts some dip-buying during the Asian session on Tuesday and stalls its modest pullback from the 159.75 area, or the highest level since July 2024, retested the previous day. Spot prices currently trade around the 159.20-159.25 region, though bulls seem hesitant amid intervention fears and ahead of the key central bank event risks.

The US Federal Reserve (Fed) is scheduled to announce its decision at the end of a two-day meeting on Wednesday, which will be followed by the Bank of Japan (BoJ) policy update on Thursday. Investors will look for fresh cues about the central bank's rate outlook amid inflationary concerns stemming from a further escalation of conflicts in the Middle East. This, in turn, will provide some meaningful impetus to the USD/JPY pair and help in determining the next leg of a directional move.

From a technical perspective, the near-term bias is mildly bullish as the USD/JPY pair holds well above the rising 200-period Simple Moving Average (SMA) on the 4-hour chart, indicating buyers retain control despite recent hesitancy. Furthermore, the Moving Average Convergence Divergence (MACD) has turned slightly positive after recovering from negative territory, suggesting improving upward momentum.

That said, the Relative Strength Index (RSI) near 49 stays close to the neutral line, which reinforces a modest upside tone rather than a strong trending move. Hence, any further move up is more likely to confront some resistance near the 159.75 region ahead of 160.00, where psychological offers could cap gains. A clear hourly close above the latter would strengthen the bullish case and pave the way for a retest of higher highs in the coming sessions.

On the downside, initial support emerges at 159.00, with a break exposing the next downside level near the 200-period SMA around 158.40. A sustained move below that area would weaken the current bullish bias and open the door toward 158.00. On the upside, immediate resistance stands at 159.60, the recent intraday high zone, followed by

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

USD/JPY 4-hour chart

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.