USD/JPY remains stable, hovering around 155.25 during the early hours of Wednesday’s Asian session. The Federal Reserve is anticipated to increase the benchmark overnight interest rate by 25 basis points, bringing it to a range of 3.75% to 4.00%. Markets expect the BoJ to increase rates by 25 basis points at the forthcoming meeting on Friday. The USD/JPY pair remains stable around 155.25 in the early Asian session on Wednesday. Traders are opting to remain on the sidelines in anticipation of the US Federal Reserve’s interest rate decision scheduled for later on Wednesday. On Friday, focus will turn to the interest rate decision of the Bank of Japan. Friday’s US inflation report indicated that prices continue to exhibit persistent elevation, with core inflation, which omits the more erratic food and energy sectors, experiencing an uptick in August compared to the preceding month. Recent inflation data from the United States, which indicated a stronger-than-anticipated increase, has reinforced market expectations regarding a potential interest rate hike by the Federal Reserve.
The US central bank is anticipated to increase its short-term interest rate by Wednesday for the first time in three years in an effort to combat persistently high inflation. Traders will pay close attention to Fed Chairman Kevin Warsh’s press conference following the rate decision, as it could provide insights into the trajectory of US interest rates. Hawkish remarks from Fed policymakers may bolster the USD relative to the JPY in the short term. The BoJ is poised to increase its key policy interest rate by a quarter point to 1.25% from 1.00% during its September meeting on Friday. This would result in the highest borrowing costs for Japan since April 1995. Traders are closely monitoring BoJ Governor Kazuo Ueda regarding the trajectory of forthcoming rate hikes and the extent to which the central bank may adjust rates during the ongoing tightening cycle. “Even if the BOJ hikes this time, it will be hard for the BOJ to be more hawkish than what the market expects,” remarked Masafumi Yamamoto highlighting the potential risk of a decline toward 157 yen per dollar.
Strategists note that the upcoming BoJ decision is unlikely to deliver major surprises on the headline move itself, with “a hike … widely expected and fully priced.” Instead, they argue that the key market driver will be “the central bank’s tone and its guidance on the pace of future hikes,” especially as “one additional hike [is] almost fully priced before year end.” In their view, this leaves the balance of risks skewed toward how firmly policymakers validate existing expectations for the BoJ’s tightening path. In the daily chart, USD/JPY continues to experience significant downside pressure, remaining below the Bollinger middle band and the 100-day simple moving average. This situation sustains a bearish outlook, even in light of a recent rebound from the lower band.
The Relative Strength Index around 40 suggests subdued momentum, indicating that any corrective uptick would likely encounter selling interest at nearby overhead levels. On the topside, initial resistance is positioned at the Bollinger middle band around 157.15, with a more substantial barrier at the 100-day SMA near 159.60, preceding the upper Bollinger band close to 162.00. On the downside, the immediate focus is on the Bollinger lower band, currently offering support around 152.35; a decisive break below this level would reveal additional weakness, whereas maintaining position above it would facilitate a constrained corrective recovery within the overarching bearish framework.
