Japanese Yen weakens further against firm USD as traders look ahead to Fed and BoJ policy meetings

• Renewed USD buying helps USD/JPY extend its rebound from a one-month low.
• Fed and BoJ decisions, alongside major US economic releases, are in focus as traders await fresh direction.
• Further gains appear supported by a fundamental backdrop that seems to favour the bulls.

At around 157.70, USD/JPY is just over 0.10% higher on Tuesday, maintaining a positive tone for a third consecutive day. The pair has extended its recovery from last week’s low near 156.00, its weakest level in over a month. Further buying remains limited, however, with traders appearing reluctant to commit ahead of important central bank decisions.

Wednesday brings the US Federal Reserve’s (Fed) decision following its two-day policy meeting. Attention will centre on the accompanying rate statement and remarks from Fed Chair Kevin Warsh at the subsequent press conference. On Thursday, the Advance US Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index will help shape expectations for the Fed’s policy outlook. These developments will, in turn, influence the US Dollar (USD) and give USD/JPY fresh direction before Friday’s pivotal Bank of Japan (BoJ) policy announcement.

For now, the Japanese Yen (JPY) remains under pressure as expectations that the BoJ may refrain from aggressive interest rate increases sustain the so-called carry trade. By contrast, the USD is drawing further buying interest for a third consecutive day. Markets increasingly accept that the US central bank will maintain its hawkish position as high energy prices fuel inflation concerns. Tensions in the Middle East also keep the geopolitical risk premium in place, providing further support for the safe-haven US Dollar and strengthening the case for additional USD/JPY gains.

USD/JPY on the 4-hour chart

Technical Outlook Shows USD/JPY Facing Resistance

Below the 200-period Exponential Moving Average (EMA) at 157.81, USD/JPY continues to face upside constraints. Initial support nevertheless lies nearby at the 23.6% Fibonacci retracement of 157.63, marking the upper edge of the corrective pullback zone.

Further support comes from a more concentrated retracement area, bounded by the 38.2% level at 156.74 and the 50.0% level at 156.02. Below that, 155.30 and 154.28 provide deeper support. A break above the 200-period EMA at 157.81, meanwhile, would bring the cycle high near 159.07 into view. A recovery above that high would be needed to temper the prevailing bearish bias.

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