USD/JPY Price Forecast: V-shaped rebound brings pair close to 158.00

• USD/JPY approaches 158.00 as US Dollar outperformance persists.
• Interest rates are expected to remain on hold at both the Fed and the BoJ this week.
• Key US economic releases will also draw investors’ attention this week.

Ahead of the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT, caution is supporting the US Dollar (USD), leaving the Japanese Yen (JPY) continuing to lag behind.

At the time of writing, a 0.1% advance has taken the US Dollar Index (DXY) to around 102.50, its highest reading in over a week. The index measures the Greenback against a basket of six major currencies.

Fed expected to hold as attention turns to December

A patient near-term approach remains the expectation of strategists at OCBC, who write that they “expect the Federal Reserve to stay on hold in October, with the focus shifting quickly to December.” Pointing out that “September CPI surprised to the upside,” they place this in the context that “most FOMC participants had already indicated that another hike could be appropriate by year-end,” leaving the policy trajectory towards the final meeting of 2024 firmly in focus.

Thursday’s scheduled releases of preliminary US Q3 Gross Domestic Product (GDP) and September Personal Consumption Expenditure (PCE) Price Index data will also be closely watched by investors this week.

For the JPY, Friday brings the Bank of Japan’s (BoJ) monetary policy announcement. A decision to keep interest rates at 1.25% is considered almost certain.

USD/JPY Holds a Mild Bullish Bias on the Daily Chart

Following a V-shaped recovery, USD/JPY is trading at 157.90 on the daily chart, marginally above its 20-day exponential moving average (EMA) of 157.75. That position preserves a modest bullish bias as the pair consolidates close to recent highs. A neutral Relative Strength Index (RSI) reading of 51.45 points to limited directional momentum, although buyers retain an advantage for as long as the price holds above the nearby average.

The 20-day EMA, around 157.75, provides the first downside support. A daily close beneath it would signal a deeper correction towards the recent low near 156.00. For another leg higher, USD/JPY would need to break decisively above the 24 September high near 159.00.

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