Japanese Yen gains after hawkish Fed hold

USD/JPY trades near the 163.60 area on Wednesday, recovering from its immediate post-announcement decline as investors assess a generally hawkish Federal Reserve (Fed) monetary policy decision.

The Federal Open Market Committee (FOMC) left the fed funds rate unchanged within the 3.50%–3.75% range, as widely expected. However, the decision was approved by a 9–3 vote, with Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan preferring a 25-basis-point rate increase.

The unusually large group of hawkish dissenters indicates that concerns about persistent inflation are gaining support within the central bank. The statement described economic activity as expanding at a solid pace, highlighted strong productivity growth and capital investment, and said the Unemployment Rate had changed little. The Fed also reiterated that inflation remains elevated relative to its 2% objective and pledged to deliver price stability.

The hawkish tone provides some support to the US Dollar by reinforcing expectations that interest rates could remain elevated or potentially rise at an upcoming meeting. Markets had already been considering a September increase, and the three dissenting votes may strengthen expectations that the debate is shifting toward additional tightening. The Fed also acknowledged that uncertainty remains elevated partly because of the conflict in the Middle East. Policymakers noted that supply shocks, including higher energy costs, are contributing to inflationary pressure.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 163.59. The pair sits in a neutral, slightly range-bound stance, holding above the 100-period Simple Moving Average (SMA) near 162.75 while trading just under the 20-period SMA around 163.73, which caps the immediate upside. The Relative Strength Index (RSI) hovers close to the 50 line at 49, hinting at balanced momentum after the recent pullback from overbought territory.

On the topside, initial resistance is seen at 163.63, followed by a nearby barrier at 163.70 and the 20-period SMA at 163.73, with a stronger hurdle emerging at 163.90. On the downside, immediate support aligns around 163.45, with the 100-period SMA at 162.75 providing a deeper floor; a sustained break below this latter level would expose the pair to a more pronounced corrective phase.

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