Japanese Yen stays range-bound against USD ahead of next week’s Fed and BoJ meetings

• Conflicting fundamental signals leave USD/JPY struggling to establish any meaningful momentum.
• With the timing of the next BoJ interest rate increase unclear, JPY bulls remain cautious.
• Lower US bond yields weigh on the USD, but geopolitical risks and a hawkish Fed cushion its decline.

Above 158.00, the USD/JPY pair remains steady in Thursday's Asian session as opposing forces prolong the consolidation in place since the start of this month. Ahead of next week's major central bank events, traders appear reluctant to take sizeable directional positions, preferring to stay on the sidelines.

On 28 October, the US Federal Reserve (Fed) will announce its interest rate decision following a two-day monetary policy meeting. The closely watched Bank of Japan (BoJ) meeting follows on 29–30 October. Until then, the sizeable gap between US and Japanese yields, together with the BoJ's cautious approach, is keeping Japanese Yen (JPY) bulls on the defensive and lending support to USD/JPY. People familiar with the matter recently indicated that BoJ officials were inclined to avoid a rare back-to-back interest rate rise this month.

Underlying inflation is quite close to the central bank's 2% target, BoJ Governor Kazuo Ueda said earlier this week, indicating room for a further rate rise as early as December. His remarks, alongside speculation that Japanese authorities could intervene to support the domestic currency, discourage aggressive bearish positions in the JPY. At the same time, falling US bond yields leave the US Dollar (USD) hovering near the three-week low reached on Tuesday, further restricting any substantial advance in USD/JPY.

Nevertheless, expectations that the US central bank will raise borrowing costs again are becoming more entrenched as volatile oil prices fuel inflation concerns, helping to contain further USD weakness. Fears of an escalation in Middle East tensions also sustain the geopolitical risk premium, supporting the dollar's safe-haven appeal and cushioning USD/JPY against declines. A convincing breakout from the short-term trading range would therefore be prudent to await before taking positions for the next directional move.

USD/JPY consolidates on the daily chart

Technical Outlook

At 159.39, the 100-day Simple Moving Average (SMA) remains above USD/JPY, as does the 50.0% Fibonacci retracement at 158.48, the midpoint of the latest swing between 152.91 and 164.06. While spot prices remain beneath these resistance levels, rallies look vulnerable.

Clearing those barriers, however, should allow further gains towards the 61.8% Fibonacci retracement at 159.80. Beyond that, resistance lies at 161.67 and the recent high near 164.06. Initial downside support sits at the 38.2% retracement at 157.17, followed by 155.54 and the structural base around 152.91. A break below that base would leave scope for a more substantial correction.

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