Yen Softens as Oil Rally and Policy Outlook Bolster Dollar-Yen Pair

Key Moments

USD/JPY extends gains for a fourth straight session, trading near 158.00 during Asian hours on Wednesday.
Rising crude oil prices weigh on the import-dependent Japanese economy, adding pressure on the Yen.
Markets expect both the BoJ and the Fed to keep rates unchanged at their upcoming meetings, while still pricing in potential December hikes.

Yen Under Pressure as USD/JPY Rally Persists

USD/JPY maintained its upward momentum for a fourth consecutive session, hovering around 158.00 in Asian trading on Wednesday. The advance reflects ongoing weakness in the Japanese Yen (JPY), which is facing renewed headwinds from higher crude oil prices that increase import costs for major energy-dependent economies such as Japan.

Oil Prices Rise Amid Uncertain Israeli Election Outcome

Crude oil prices moved higher as global markets monitored election developments in Israel that could influence the trajectory of the Middle East conflict. Exit polls indicated a tightly fought race, showing Prime Minister Benjamin Netanyahu level with opposition figure Gadi Eisenkot, with neither camp securing a clear majority as vote counting continued.

Despite the apparent stalemate, early results suggested waning backing for Netanyahu, who “has been a dominant force in Israeli politics while leading the country through nearly three years of conflict.”

BoJ Seen on Hold After Earlier Tightening

The Bank of Japan (BoJ) is widely expected to keep interest rates unchanged at its policy meeting scheduled for Friday. This anticipated pause follows a total of 50 basis points of rate increases implemented earlier in the year, as officials evaluate how previous tightening is feeding through to the economy.

Market pricing still points to the likelihood of another move later in the year, with expectations strongly tilted toward an additional rate hike in December.

Fed Expected to Stand Pat, December Hike Still in Play

The Federal Reserve (Fed) is likewise projected to leave its benchmark rate unchanged within the 3.75% to 4.0% target band at its decision on Wednesday. Data from the CME FedWatch Tool showed markets assigning a 92.8% probability to a hold at the October meeting.

Investors are set to scrutinize comments from Fed Chair Kevin Warsh for indications about the future policy path. Market-based probabilities currently reflect an 84.4% chance of a rate increase at the December meeting.

Technical Picture: USD/JPY Holds Bullish Bias

On the daily chart, USD/JPY trades at 158.00 and retains a constructive bullish profile, with spot prices staying above both short-term and medium-term Exponential Moving Averages (EMAs). The 50-period EMA at 157.96 and the nine-period EMA at 157.76 sit just below the market, highlighting underlying demand on dips. The 14-day Relative Strength Index (RSI), near 52, signals momentum that is neutral to mildly positive rather than overstretched.

On the downside, initial technical support is located at the 50-period EMA around 157.96, backed closely by the nine-period EMA at 157.76, forming a near-term demand band on any retracement. A more substantial decline would encounter additional, longer-term support at the FXS Fed Sentiment Index base near 127.51, although this level is well removed from current pricing and serves mainly as a broad macro reference.

Technical Indicator	Level	Implication
Spot USD/JPY	158.00	Extends four-day winning streak
50-period EMA	157.96	Immediate support and dip-buying area
9-period EMA	157.76	Reinforces short-term demand zone
14-day RSI	Around 52	Neutral-to-positive momentum, not overbought
FXS Fed Sentiment Index base	127.51	Long-term structural support reference