USDJPY remains near its peak levels while market participants look forward to the upcoming FOMC and BoJ interest rate announcements

Market Fundamentals Overview

US Dollar (USD)

Early this week, the US dollar experienced a broad retreat, likely due to traders taking profits from recent highs rather than any significant shift in economic fundamentals. No major events have emerged to prompt a full reversal.

Attention is still centered on the ongoing US-Iran conflict. If tensions persist, the dollar may remain strong. However, any signs of easing could spark a market rebound and put downward pressure on the greenback.

The Federal Reserve is set to announce its latest interest rate decision today, with expectations that rates will stay at 3.50-3.75%. The central bank is anticipated to adopt a cautious stance given the geopolitical situation. This meeting will also reveal updated economic projections and the Dot Plot.

Forecasts suggest inflation and unemployment figures may be revised higher, while growth estimates could be lowered. The Dot Plot is expected to signal only one rate reduction in 2026.

Japanese Yen (JPY)

The outlook for the yen remains unchanged, as slow progress on inflation and ongoing global risks continue to weigh on the currency. Expectations for a rate hike have been pushed further into the future.

The Bank of Japan will announce its rate decision tomorrow, with most analysts predicting rates will remain at 0.75%. Governor Ueda is unlikely to provide new guidance, instead reiterating the commitment to raise rates if economic conditions warrant it.

Market participants are closely watching remarks about the yen, which recently hit a two-year low against the dollar. In 2024, yen weakness influenced a previous rate hike, so traders will be alert for any hints that similar action could be taken again.

USDJPY Technical Analysis – Daily Chart

Looking at the daily chart, USDJPY has eased slightly from its peak but continues to show a bullish trend. This timeframe offers limited insight, so a closer look at shorter intervals is necessary for more detail.

USDJPY Technical Analysis – 4-Hour Chart

The 4-hour chart reveals that the price has slipped below the upward trendline that previously supported bullish momentum. A minor downward trendline now marks the current pullback. Sellers may use this trendline as a reference point, aiming for a decline toward the 157.00 level. Buyers, meanwhile, are watching for a breakout above resistance, which could lead to a rally toward 160.00.

USDJPY Technical Analysis – 1-Hour Chart

On the 1-hour chart, the situation remains straightforward: sellers are likely to target a rejection at the downward trendline, while buyers are waiting for a breakout. The red lines indicate today's average daily range.

Key Events Ahead

• Today: US Producer Price Index report and FOMC policy announcement
• Tomorrow: Bank of Japan policy decision and latest US Jobless Claims data

Geopolitical developments, especially those related to the US-Iran conflict and the Strait of Hormuz, remain crucial. Stay alert for breaking news that could impact market direction.