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USD/JPY drops even as Fed holds hawkish tone

  • USD/JPY falls to 158.40 as Fed keeps rates unchanged, with Jerome Powell signaling a hawkish stance due to heightened inflation risks.
  • The BoJ maintained rates at 0.75% with a dovish tone, as policymakers largely back steady policy but leave room for future hikes.
  • Geopolitical tensions rise as Japan and allies warn Iran over Strait of Hormuz closure.

USD/JPY fell to 158.40 on Thursday as investors assessed both nations' central bank decisions. On the one hand, there was the Federal Reserve's (Fed) decision to hold rates steady, with Chair Jerome Powell claiming that higher energy prices will push up overall inflation. Without inflation progress, Powell said there won't be a rate cut. Powell's words supported the Greenback and signaled a hawkish stance.

On the other hand, the Bank of Japan (BoJ) also held interest rates steady at 0.75%, but in a highly dovish manner, with eight members voting in favour of holding rates unchanged and one in favour of a rate hike. The BoJ emphasized that it will continue raising its policy rate if the economy and prices develop as projected. Additionally, it stated that it will implement monetary policy as necessary to sustainably and consistently reach its 2% inflation target.

Japan and other countries release joint statement over Strait of Hormuz:

We will take other steps to stabilise energy markets, including working with certain producing nations to increase output.

Express our readiness to contribute to appropriate efforts to ensure safe passage through the strait.

We call on Iran to cease immediately its threats, laying of mines, drone and missile attacks, and other attempts to block the strait.

Condemn in the strongest terms recent attacks by Iran on unarmed commercial vessels in the Gulf. Japan claimed alongside”

Chart Analysis USD/JPY

Technical Analysis:

In the 4-hour chart, USD/JPY trades at 158.38. The near-term bias is heavily bearish as the pair slips below the 20-period Simple Moving Average (SMA) around 159.18 while still holding well above the rising 100-period SMA near 157.94, keeping the broader uptrend intact but exposing a corrective phase. The Relative Strength Index (RSI) retreats toward 37, indicating weakening bullish momentum and reinforcing the view of building downside pressure after repeated failures to sustain gains above 159.80.

Immediate resistance now emerges at 159.05, with a stronger cap at 159.29, where recent price congestion aligns with the broken short-term average and could limit rebounds if tested. On the downside, initial support is seen at 158.39, guarding the more important floor at 158.06; a clear break below this latter level would open the way toward the 100-period SMA as the next bearish target.

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

Author

Agustin Wazne

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

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