USD/JPY Price Forecast: Ascending channel support holds the key after Fed, BoJ policy updates

The USD/JPY pair attracts heavy selling on Thursday and dives to the 159.00 neighborhood during the first half of the European session, eroding a major part of the previous day's strong move up to the highest level since July 2024. After a muted reaction to the Bank of Japan (BoJ) decision to keep interest rates unchanged, the Japanese Yen (JPY) strengthened following Governor Kazuo Ueda's comments during the post-meeting press conference.

In fact, Ueda raised concerns that the pace of inflation increase is expected to face upward pressure from higher oil prices due to Middle East tensions. Ueda, however, said that the underlying inflation is expected to be at a level in line with the price target in the second half of the projection period and added that real interest rates are at significantly low levels. Ueda reiterated that the central bank will continue to raise the policy rate if the economy and prices move in line with the forecast, in accordance with improvements in the economy and prices. This, along with speculations that Japanese authorities would step in to stem further weakness in the domestic currency, provides a goodish lift to the JPY and weighs on the USD/JPY pair.

The US Dollar (USD), on the other hand, preserves Wednesday's gains that followed the release of hotter Producer Price Index (PPI) and the Federal Reserve's (Fed) hawkish outlook. The US Labor Department reported that the headline PPI rose 0.7% in February, from 0.3% in the previous month, and the yearly rate  jumped to 3.4% – marking the largest 12-month advance since February 2025. Moreover, the US central bank raised the year-end inflation outlook (PCE), citing risks from higher energy prices due to the Iran war. The Fed also upgraded its 2026 growth projection and projected only one rate reduction this year, and one in 2027, which acts as a tailwind for the USD and should support the USD/JPY pair.

Meanwhile, investors remain concerned that the war-driven surge in Crude Oil prices could weaken Japan's economic growth and rekindle inflation, creating a classic stagflationary environment and complicating the BoJ's normalization efforts. This, in turn, might hold the JPY bulls from placing aggressive bets and contribute to limiting losses for the USD/JPY pair. Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped out near the 160.00 psychological mark and positioning for any meaningful corrective decline. Traders now look to the US macro data – the usual Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index – for some impetus.

USD/JPY 4-hour chart

Technical Analysis:

The intraday downfall stalls ahead of a support marked by the lower boundary of an ascending channel that has guided gains from around 154.90. This is followed by the rising 100-period Exponential Moving Average (EMA) on the 4-hour chart, currently pegged near 158.00. A convincing break below the latter would shift the focus toward a deeper correction within the broader trend.

The Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) has flattened just under the zero line after a modest recovery, hinting that bulls retain an edge but lack strong momentum for an immediate breakout. That said, the Relative Strength Index (RSI) reading near 54 stays above the midline and points to steady, not overstretched, upside momentum.

Meanwhile, initial resistance emerges near 160.00, followed by the channel top near 160.80, where the positive move earlier this month was capped. A clear break higher would open the way toward the 162.00 region.

(The technical analysis of this story was written with the help of an AI tool.)