USD/JPY Price Forecast: V-shape recovery extends to near 158.00

USD/JPY rises to near 158.00 as the US Dollar continues to outperform.
Both the Fed and the BoJ are expected to leave interest rates unchanged this week.
This week, investors will also pay attention to key US data releases.

The Japanese Yen (JPY) continues to underperform against the US Dollar (USD) as the latter strengthens amid caution ahead of the Federal Reserve’s (Fed) monetary policy at 18:00 GMT.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher to near 102.50, the highest level seen in over a week.

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What to expect at the Fed meeting?

Strategists at OCBC expect the Fed to remain patient in the near term, writing that they “expect the Federal Reserve to stay on hold in October, with the focus shifting quickly to December.” They highlight that “September CPI surprised to the upside,” and note that this comes against a backdrop where “most FOMC participants had already indicated that another hike could be appropriate by year-end,” keeping attention firmly on the policy path into the final meeting of 2024.

This week, investors will also focus on the preliminary us Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) Price Index data for September, which are scheduled for Thursday.

On the JPY front, investors await Bank of Japan’s (BoJ) monetary policy announcement on Friday. The BoJ is almost certain to hold interest rates steady at 1.25%.

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 157.90 after a V-shape recovery, holding slightly above the 20-day exponential moving average (EMA) at 157.75, which keeps a mild bullish bias intact while the pair consolidates near recent highs. The Relative Strength Index (RSI) at 51.45 is neutral, hinting that directional momentum is modest and that bulls currently retain an edge as long as price stays above the nearby average.

On the downside, immediate support is located at the 20-day EMA around 157.75, where a daily close below would suggest a deeper correction toward the recent low near 156.00. On the upside, the pair needs a decisive break above the September 24 high near 159.00 for a fresh upside leg.

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

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).