USD/JPY: Gopher gains ground ahead of Fed decision as inflation pressure builds

USD/JPY is trading near the 159.50 price zone, gaining some ground during the American session as the pair awaits the Federal Reserve's (Fed) monetary policy decision. The Fed is expected to keep rates on hold later today. The Fed will also release the Summary of Economic Projections (SEP) or dot plot. Fed Chair Jerome Powell will offer a press conference after the interest rate decision has been made public. Markets are on the lookout for the impact that the United States's and Israel's war on Iran war may have on the Fed’s monetary policy decisions.

On another note, the Bank of Japan (BoJ) is also expected to leave its benchmark interest rate unchanged at 0.75% after its interest rate decision early on Thursday, adopting a cautious stance amid the Iran war-related spike in energy prices. The BoJ is, however, expected to maintain a hawkish stance.

In the US, the core February Producer Price Index (PPI) was released at 3.9% YoY from the 3.7% expected, signaling that inflation is increasing. Notably, this report doesn’t include the energy price inflation from the Middle East war. This news spiked risk among investors, giving the Greenback the edge in the near term.

Short-term technical analysis:

In the 4-hour chart, USD/JPY trades at 159.43. The Gopher retains a mild bullish bias as it holds slightly above the rising 20-period and well above the 100-period Simple Moving Averages (SMAs). Price action continues to respect a sequence of higher closes relative to the 100-period SMA, reinforcing underlying demand on dips. The Relative Strength Index (RSI) has bounced back toward the 60 area after lingering near the 50 midline, indicating recovering upside momentum rather than overbought conditions.

Immediate support is seen at 158.96, where prior horizontal demand aligns just above the 20-period SMA around 159.23, forming an initial cushion for shallow pullbacks. A deeper slide would expose the next support at 158.57, which protects the broader bullish structure as long as the price stays well above the 100-period SMA near 157.70. On the upside, initial resistance emerges at 159.59, the recent horizontal cap, and a sustained break above this barrier would open the way toward fresh highs in the current leg.

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