USD/JPY forecast: Fed turmoil and PCE data fuel 146.00–148.80 breakout watch

USD/JPY rangebound ahead of key catalysts

The yen pair continues to trade inside a tight consolidation between 146.20 and 148.80, digesting August’s sharp rally. Neither side has managed to force a breakout, reflecting investor caution as two key forces converge:

1. Political risk at the Fed – the dismissal of Governor Lisa Cook has raised doubts about the central bank’s independence.
2. U.S. inflation and consumption data – Friday’s Core PCE Price Index, Personal Spending, and Income numbers could dictate whether September brings the first rate cut.

UBS has already revised forecasts lower, projecting USD/JPY toward the 142–140 range by mid-2026. But in the near term, traders are waiting for the first decisive move out of this consolidation box.

Fed governor dismissal: Political shock to Dollar credibility

The unprecedented removal of Fed Governor Lisa Cook by Trump injected fresh volatility. Markets are now questioning whether monetary policy decisions are being driven by political pressure rather than independence, a narrative that undermines the dollar’s safe-haven appeal.

• Yen strengthened on credibility concerns.
• USD weakened, despite risk-off sentiment that would normally support it.
• Rate cut odds surged, with FedWatch showing over 80% probability of easing in September.

Core PCE, spending and income: The breakout trigger

Friday’s U.S. releases - Core PCE Price Index, Personal Spending, and Personal Income - are highly anticipated. PCE is the Fed’s preferred inflation gauge, and combined with spending/income trends, it will heavily influence policy expectations.

• Hotter data (>0.3% MoM PCE): Would challenge the rate-cut narrative, strengthen the dollar, and support a bullish breakout above 148.80.
• Weaker data (<0.3% MoM PCE/Income): Would reinforce September easing bets, favoring a bearish breakdown below 146.20.

This data could be the decisive trigger that resolves USD/JPY’s consolidation, especially given its proximity to the FOMC meeting.

News impact breakdown

Technical outlook: Box range in focus

USD/JPY is consolidating in a 146.20 – 148.80 box, with mid-range support at ~147.30 acting as balance. The next breakout will likely coincide with Friday’s data or FOMC expectations.

Bullish scenario: Range expansion to 150.00+

If buyers defend the 147.20–147.40 mid-range and push price through the 148.80 ceiling, momentum could extend the August rally.

• Triggers:
• • Mid-range defense at ~147.30.
  • Break and hold above 148.80.
• Targets:
• • 149.40 (round number magnet).
  • 150.00–150.90 (measured move extension).
• Invalidation: Breakdown below 146.80 would weaken bullish bias.

Bearish xcenario: Breakdown to 145.50–144.50

If price fails to hold the midpoint and momentum turns lower, USD/JPY could slide back to the 146.20 support floor. A breakdown there would confirm bearish expansion.

• Triggers:
• • Rejection near mid-range resistance (~147.50).
  • Breakdown below 146.20.
• Targets:
• • 145.50 (short-term liquidity pocket).
  • 144.80–144.50 (swing support zone).
  • 142.60 (deeper flush if momentum accelerates).
• Invalidation: Breakout above 148.80 cancels the bearish thesis.

Final thoughts

USD/JPY is coiled inside a 146.20–148.80 range, awaiting its breakout trigger. Two forces now dominate the outlook:

With political pressure on the Fed undermining the dollar and Core PCE inflation data looming, a breakout is imminent.

• Bullish case: Breakout above 148.80 → 149.40 → 150.00–150.90.
• Bearish case: Breakdown below 146.20 → 145.50 → 144.50 → 142.60.

Traders should brace for volatility, liquidity sweeps, and false breaks around Friday’s PCE release. Patience and confirmation remain key.