Key Moments
- USD/JPY is trading around 157.70, up just over 0.10%, extending a three-day recovery from an over one-month low near 156.00.
- Traders are focused on the upcoming Fed rate decision, US Q3 Advance GDP, and PCE Price Index ahead of the Bank of Japan policy announcement.
- Expectations for a hawkish Fed and a cautious BoJ, alongside persistent geopolitical risks, are supporting the US Dollar against the Japanese Yen.
USD/JPY Steadies After Bounce From One-Month Low
The USD/JPY pair is trading with a constructive tone for the third consecutive session on Tuesday, extending its rebound from an over one-month trough around the 156.00 area reached last week. Despite the recovery, upside momentum is contained, with spot levels hovering near 157.70 and showing a modest gain of just over 0.10% on the day. Market participants appear reluctant to add sizeable positions while awaiting several key central bank decisions and data releases.
Fed, US Data and BoJ in Focus for Policy Direction
The US Federal Reserve is set to unveil its latest policy decision at the conclusion of a two-day meeting on Wednesday. Market attention is centered less on the rate outcome itself and more on the accompanying policy statement and comments from Fed Chair Kevin Warsh during the subsequent press conference.
On Thursday, the Advance US Q3 Gross Domestic Product report and the Personal Consumption Expenditures (PCE) Price Index are due, both of which are expected to shape market views on the Fed’s future policy trajectory. These releases are likely to influence the US Dollar’s performance and could provide additional direction for USD/JPY ahead of the Bank of Japan’s policy announcement on Friday.
Carry Trade Dynamics and Risk Backdrop Support USD
In the interim, investor expectations that the Bank of Japan may refrain from moving quickly toward aggressive rate increases are helping to sustain carry trade strategies, weighing on the Japanese Yen.
At the same time, the US Dollar is drawing continued support for a third straight session amid growing conviction that the Fed will maintain a hawkish posture, with inflation concerns fueled by elevated energy prices. Ongoing geopolitical tensions in the Middle East are also keeping a risk premium embedded in markets, reinforcing demand for the safe-haven Greenback. Together, these factors are seen as underpinning prospects for further upside in the USD/JPY pair.
Technical Picture: Key Levels on the 4-Hour Chart
On the technical front, USD/JPY is trading with a capped profile, holding below the 200-period Exponential Moving Average (EMA) at 157.81 on the 4-hour chart. Immediate support is provided by the 23.6% Fibonacci retracement at 157.63, which also represents the upper edge of the current corrective pullback zone.
| Technical Level | Description | Level |
|---|---|---|
| 200-period EMA (4H) | Key resistance / cap | 157.81 |
| Fibonacci 23.6% | Initial support / pullback upper boundary | 157.63 |
| Fibonacci 38.2% | Part of denser retracement cluster | 156.74 |
| Fibonacci 50.0% | Part of denser retracement cluster | 156.02 |
| Support | Deeper floor | 155.30 |
| Support | Deeper floor | 154.28 |
| Cycle High | Level to reclaim to ease bearish bias | 159.07 |
Below 157.63, a more substantial support band is located between the 38.2% Fibonacci retracement at 156.74 and the 50.0% retracement at 156.02. Additional, deeper downside levels are seen at 155.30 and 154.28. On the topside, a sustained move above the 200-period EMA at 157.81 would bring the cycle high near 159.07 back into view. A break and hold above that high would be required to alleviate the present bearish bias.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
