USD/JPY Price Forecast: Post-BoJ move up stalls near 150.00; focus shifts to Fed decision

The USD/JPY pair attracted buyers for the fourth straight day and climbed to a two-week top during the early European session on Wednesday, though it struggles to capitalize on the move beyond the 150.00 psychological mark. The Japanese Yen (JPY) started weakening in reaction to weaker-than-expected domestic data and continued losing ground after the Bank of Japan (BoJ) announced its policy decision.

Japan's Trade Balance shifted to a surplus of ¥584.5 billion in February from a deficit of ¥415.43 billion in the same month a year earlier amid a surge in exports by 11.4% YoY and a larger than expected fall of 0.7% in imports. The reading, however, fell short of market expectations. Adding to this, Japan’s Machinery Orders fell 3.5% MoM in January 2025, significantly worse than the 1.2% decline registered in the previous month. On an annual basis, Machinery Orders rose 4.4% during the reported month, slightly above December’s 4.3% increase, though the reading was below the 6.9% forecast. Moreover, a Reuters Tankan poll indicated that business sentiment among Japanese manufacturers worsened for the first time in three months in March due to concerns about US tariff policies and weakness in China’s economy.  

Meanwhile, the BoJ, as was widely expected, announced that it maintained the short-term interest rate target in the range of 0.40%- 0.50% after concluding its two-day monetary policy review meeting. In the accompanying policy statement, the central bank noted that Japan's economy is recovering moderately, though some weakness persists, and that the underlying inflation is expected to align with the target in the latter half of the three-year outlook period. This exerts additional pressure on the JPY, which, along with a modest US Dollar (USD) recovery, provides an additional lift to the USD/JPY pair. The intraday move-up, however, runs out of steam in reaction to BoJ Governor Kazuo Ueda's remarks at the post-meeting press conference, saying that the central bank wants to conduct policies before it is too late. 

Ueda added that achieving a 2% inflation target is important for long-term credibility and the BoJ will keep adjusting the degree of easing if the outlook is to be realized. This comes on top of the preliminary results from Japan's annual spring labor negotiations, which concluded on Friday and showed that firms largely agreed to union demands for strong wage growth for the third consecutive year. This could boost consumer spending and contribute to rising inflation, which, in turn, should give the BoJ headroom to keep hiking rates. In contrast, investors have been pricing in the possibility that the Federal Reserve (Fed) will lower borrowing costs several times this year. This holds back the USD bulls from placing aggressive bets ahead of the FOMC policy update and prompts some intraday selling around the USD/JPY pair. 

The Federal Reserve (Fed) is scheduled to announce its decision later during the US session and is widely expected to keep the federal funds rate unchanged at the current range of 4.25% to 4.50%. Meanwhile, the market focus will remain glued to the accompanying policy statement and the updated economic projections, which include the so-called dot plot. Apart from this, Fed Chair Jerome Powell's comments at the post-meeting press conference will be looked upon for cues about the future rate-cut path. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the USD/JPY pair. Nevertheless, the divergent BoJ-Fed policy expectations warrant some caution for bullish traders and before positioning for any meaningful appreciating move. 

USD/JPY 4-hour chart

Technical Outlook

From a technical perspective, the recent breakout above the 100-period Simple Moving Average (SMA) on the 4-hour chart was seen as a key trigger for bulls. That said, failure near the 150.00 psychological mark for the second straight day and still negative oscillators on the daily chart warrant some caution before positioning for further gains. A sustained strength beyond the said handle, however, might trigger a short-covering rally and lift the USD/JPY pair to the 150.75-150.80 region, or the 200-period SMA on the 4-hour chart, en route to the 151.00 round figure. 

On the flip side, the 148.80 region (100-period SMA on the 4-hour chart) should act as immediate support. A convincing break below will suggest that the recent recovery from a multi-month low, witnessed over the past week or so has run out of steam and make the USD/JPY pair vulnerable. The subsequent decline could drag spot prices to the 148.25-148.20 support en route to the 148.00 mark. The downward trajectory could extend further towards the 147.70 area, 147.20 region, the 147.00 mark, and the 146.55-146.50 region, or the multi-month low touched on March 11.