|

USD/JPY drops post Fed decision, as US Dollar and US yields plummet

  • USD/JPY dives following the Federal Reserve’s pivot to dovish stance.
  • US economic data, including solid Retail Sales and a tight Initial Jobless Claims report, took a backseat amid the Goldilocks scenario.
  • Upcoming events include Japan's Flash PMIs for December, with a focus on next week's Bank of Japan's (BoJ) monetary policy meeting.

The USD/JPY edges down following Wednesday's Federal Reserve’s (Fed) decision, which sent US Treasury yields plummeting alongside the Greenback. Fed’s adopting a dovish stance is the main reason for the pair to print losses of 0.68%, as it trades at around 141.89.

Traders continued to digest the Fed’s pivot after repeating the mantra that they would keep rates “higher for longer.” Even though inflation is slowing at a solid pace, it remains elevated, reaffirmed by the US central bank on its monetary policy statement. But officials downward revising the fed funds rates (FFR) for 2023 to 5.4%, along with expectations for three rate cuts in 2024, were the green light for investors seeking risk.

Despite that, they remained cautious ahead of Powell’s words, but failure to push back against 100 bps of rate cuts, was the last nail in the coffin for a strong US Dollar. The US Dollar Index (DXY), which tracks the Greenback’s performance against six currencies, has tumbled close to 1.80%, down at 101.94.

Another factor that’s influencing the USD/JPY pair is the plunge of the 10-year benchmark note rate, closely correlated with the major. The US 10-year Treasury yield has dived 26 basis points to 3.924%.

Meanwhile, US economic data took the backseat despite US Retail Sales being solid. That and a tight Initial Jobless Claims report for the week ending December 9 reaffirmed the Goldilocks scenario.

Ahead in the calendar, the Japanese economic docket will feature Flash PMIs for December, which could barely move the needle on the Japanese Yen (JPY) front. Traders are eyeing next week’s Bank of Japan’s (BoJ) monetary policy meeting. Although market participants don’t expect the end of negative rates, the BoJ could lay the ground ahead of pulling the trigger.

On the US front, Flash PMIs, Industrial Production and the beginning of the release of Manufacturing Indices revealed by Fed’s Regional Banks, are expected.

USD/JPY Technical Levels

USD/JPY

Overview
Today last price141.93
Today Daily Change-1.03
Today Daily Change %-0.72
Today daily open142.96
 
Trends
Daily SMA20147.48
Daily SMA50149.02
Daily SMA100147.6
Daily SMA200142.46
 
Levels
Previous Daily High146
Previous Daily Low142.65
Previous Weekly High147.5
Previous Weekly Low141.64
Previous Monthly High151.91
Previous Monthly Low146.67
Daily Fibonacci 38.2%143.92
Daily Fibonacci 61.8%144.72
Daily Pivot Point S1141.74
Daily Pivot Point S2140.52
Daily Pivot Point S3138.39
Daily Pivot Point R1145.09
Daily Pivot Point R2147.22
Daily Pivot Point R3148.44

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

GBP/USD extends the drop to 1.3360

GBP/USD builds on Monday’s decline and briefly clinches five-day lows near 1.3360 on Tuesday. Cable’s extra pullback follows the better tone in the Greenback as uncertainty in the Middle East prompts investors to adopt a cautious stance. Meanwhile, an apathetic UK labour market report also collaborates with the selling pressure on the British Pound.

EUR/USD stays offered just above 1.1400

EUR/USD keeps the downtrend well in place for yet another day, challenging the 1.1400 contention zone on Tuesday. The continuation of the selling impulse in spot comes amid decent gains in the US Dollar, which continues to find support in the persistent effervescence surrounding the US-Iran crisis.

Middle East crisis intensifies, Gold up

Gold now seems to have embarked on a consolidative phase below the key $4,100 mark per troy ounce in the latter part of Tuesday’s session. Meanwhile, uncertainty surrounding the Middle East conflict and rising expectations for a hawkish Fed policy outlook are expected to limit the precious metal’s bullish momentum in the near term.

XRP rebounds on rising on-chain activity
Ripple (XRP) ticks up and trades around $1.13 at the time of writing on Tuesday. This rebound aligns with a broader recovery in the cryptocurrency market, attributed to reports that mediators between the United States (US) and Iran are seeking a 10-day cessation of strikes to find a way back to the signed Memorandum of Understanding (MoU).
The Iranian war has again risen
The Iranian war has again risen to the top of the economics factor list. There is no end in sight. Intelligence experts say the current level of offense/retaliation will not change minds in Tehran, while in Washington, Trump fears all-out war, which would mean boots on the ground.
US Dollar mid-year outlook: Exceptional currency, exceptional risks?
The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.