The Japanese Yen (JPY) made a modest recovery against the US Dollar (USD) during Wednesday’s Asian session, climbing off a one-week low amid cautious market sentiment. However, upside potential for the JPY remains capped as investors adopt a wait-and-see approach ahead of major central bank decisions from both the Federal Reserve (Fed) and the Bank of Japan (BoJ).
Market Caution Ahead of Fed and BoJ Keeps Yen Movement Limited
Both the Fed and BoJ are expected to maintain their current interest rate policies in upcoming meetings—scheduled for Wednesday and Thursday respectively. As such, traders are closely watching for any forward guidance or signals on future rate paths, especially given persistent inflation concerns and shifting global trade dynamics.
Despite the JPY’s slight rebound, weakening inflation data in Japan and recent political uncertainties are dampening expectations for an imminent BoJ rate hike. Last week’s Tokyo inflation data surprised to the downside, and a recent defeat for Japan’s ruling coalition in upper house elections adds to the uncertainty surrounding policy normalization.
Trade Optimism and Fed Policy Outlook Bolster USD
On the flip side, the US Dollar remains underpinned by optimism stemming from recent US trade agreements with Japan and the European Union. A strong US labor market and rising consumer confidence have further supported the greenback. The Conference Board’s Consumer Confidence Index jumped to 97.2 in July, while JOLTS job openings declined slightly to 7.43 million—suggesting gradual cooling, but still-strong hiring activity.
Investors expect the Fed to keep interest rates unchanged, but political pressure from the White House to begin cutting rates has sparked speculation about a potential dovish shift. Markets will analyze Jerome Powell’s post-meeting press conference and the policy statement for any signs of a rate-cut timeline.
Technical Outlook: Key Levels to Watch for USD/JPY
The USD/JPY pair is hovering near 148.00, with immediate support seen at the 147.75–147.70 range. A break below this zone could open the door to 147.00, followed by the 100-day Simple Moving Average (SMA) around 146.70. A decisive move below 146.70 would confirm a bearish reversal and may lead to a test of the 145.90–146.00 area.
On the upside, resistance sits near 148.50 and 148.80. A breakout above 149.10 (monthly high) would put focus on the 200-day SMA near 149.55. Sustained momentum beyond this point could pave the way for a retest of the psychological 150.00 level.
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