Dollar-Yen Dips as Markets Await BoJ and Fed Decisions

Key Moments

Dollar-Yen Eases as Greenback Softens

USD/JPY is trading marginally weaker around 159.20 in the late Asian session on Monday, having surrendered its opening advance as the US Dollar reversed earlier strength. The move comes even as diplomatic tensions between the United States and Iran remain unresolved.

At the time of writing, the US Dollar Index (DXY) – which measures the currency against a basket of six major peers – is slightly lower, hovering near 98.45.

US-Iran Talks Canceled After Counteroffer Rejected

Peace discussions between the United States and Iran, which had been slated to resume in Islamabad over the weekend, were called off. According to Axios, Washington canceled the visit of US envoys, arguing that proceeding would be futile because the counterproposal received from Iran via Pakistan was deemed inadequate.

US President Donald Trump also confirmed that Iran has offered a new proposal, which is better than what it was going to present in peace talks, and “is much better, but still not good enough”.

BoJ and Fed Policy Meetings in Focus

On the domestic policy front, market participants are focused on upcoming rate decisions from the Bank of Japan and the Federal Reserve, scheduled for Tuesday and Wednesday, respectively. Both institutions are expected to keep benchmark interest rates unchanged.

Policymakers at both central banks are anticipated to emphasize the dual challenge of upside inflation risks and downside economic risks in an environment of elevated energy prices.

USD/JPY Technical Picture

USD/JPY has edged down toward 159.20 in Asian trading but continues to exhibit a broadly constructive bullish setup, as spot prices remain above the 20-day exponential moving average (EMA) at 159.14. The pair is currently retesting the breakout zone of a Descending Triangle pattern on the daily chart near the downward-sloping boundary around 159.20. This type of breakout is typically associated with potential for renewed upside.

The Relative Strength Index (RSI) hovering near 52 signals momentum that is neutral to mildly positive, rather than indicative of an overextended advance.

On the downside, the reclaimed downward-sloping boundary around 159.17, which aligns closely with the 20-day EMA at 159.14, forms the nearest support area. A clear move below this zone would bring the horizontal support of the previously mentioned Descending Triangle into view around 157.60.

On the upside, if USD/JPY manages to hold above the downward-sloping border, the pair could push toward the 160.00 handle. A sustained break above 160.00 would then leave room for an extension higher toward the March 30 peak at 160.46.