USD/JPY Rebounds as Dollar Firms, EMA Support Holds Key

Key Moments

Dollar-Yen Recovers After Thursday Sell-Off

The USD/JPY pair advanced about 0.4% to trade close to 158.33 during the Asian session on Friday, staging a recovery following a sharp decline on Thursday. The Japanese Yen (JPY) underperformed even as the Bank of Japan (BoJ) maintained a hawkish outlook on monetary policy.

Japanese Yen Performance Against Major Currencies

The latest moves in the foreign exchange market showed notable shifts in the Japanese Yen’s value. The JPY registered the strongest performance against the Euro, as illustrated by the daily percentage changes versus major currencies.

The following table summarizes the description provided:

The referenced heat map displays percentage changes between major currencies, with the base currency taken from the left-hand column and the quote currency from the top row. For example, selecting the Japanese Yen on the left and moving across to the US Dollar shows the percentage change for JPY (base)/USD (quote).

BoJ Holds Rates, Signals Possible Hike

After Thursday’s policy decision, BoJ Governor Kazuo Ueda commented on the outlook for interest rates. The central bank left its benchmark rate unchanged at 0.75%. Ueda indicated that an additional rate hike is possible if the economic downturn associated with conflicts in the Middle East proves to be temporary.

In its policy communication, the BoJ highlighted uncertainty around Japan’s growth trajectory amid rising energy costs. These higher prices were linked to a joint assault by the United States and Israel against Iran, which has contributed to the challenging backdrop for the Japanese economy.

US Dollar Firms as Fed Seen on Extended Pause

The US Dollar regained strength after Thursday’s volatility, supported by expectations that the Federal Reserve will maintain its current policy stance in the face of elevated global inflation. At the time of reporting, the US Dollar Index (DXY) – which measures the Greenback against six major peers – was up 0.2% and trading around 99.35.

Market-based expectations, as reflected by the CME FedWatch tool, indicated that the Fed is unlikely to deliver any interest rate cuts during the year, reinforcing the view of an extended pause at existing levels.

USD/JPY Technical Outlook

At the time of writing, USD/JPY was trading near 158.33. The near-term technical bias remains mildly positive following a rebound from the rising 20-day Exponential Moving Average, located close to 157.50. This recovery has preserved the broader bullish structure after last week’s brief pullback toward 157.70.

Momentum gauges have moderated, with the 14-day Relative Strength Index (RSI) slipping from the 60.00-80.00 band into the more neutral 40.00-60.00 range. Despite this, the prevailing trend is still characterized as bullish.

On the downside, initial support is located at the 20-day EMA around 157.50. A daily close below this level would open the door to a deeper retracement, initially targeting the March 5 low at 156.46 and then potentially the February 25 low at 155.35.

On the topside, the first resistance level is at 159.00, followed by the late-June high near 159.90. A rejection around that region would suggest ongoing range-bound trading. Conversely, a daily close above that high would signal a renewed upside push toward the 160.50 area.