USD/JPY Price Analysis: USD trades soft ahead of Fed decision

USD/JPY tallies a third consecutive day of losses towards the 140.40 area.
US Treasury yields are falling ahead of the Fed decision.
JPY strength suggests that markets are concerned with a possible surprise by the BoJ on Friday.

Patricio Martín FXStreet

On Wednesday, the JPY gained ground agains most of its rivals, and the USD/JPY pair declined towards 140.40. The USD trades soft ahead of the Federal Reserve (Fed) decision later in the session, while the Yen strengthened on the back of a possible surprise of the Bank of Japan (BoJ) on Friday.

Ahead of the Federal Reserve (Fed) decision later in the session, the USD is falling, and US Treasury yields are backing down. Markets have already priced in a 25 basis point (bps) hike and are betting on 20% odds of a similar hike in September and then on 45% probabilities in November. As there won’t be any updated macro forecast or dot plot, messaging regarding forward guidance will be key for investors modelling their expectations for the next meetings.

On the other hand, markets have been receiving mixed signals regarding the next BoJ decision in the last sessions. Masato Kanda, a top currency Japanese diplomat, suggested that a Yield Control Curve (YCC) is highly possible. At the same time, BoJ’s Governor Kazuo Ueda was quoted as saying that the bank will maintain its accommodative approach. While the BoJ has a history of surprising markets, the broad consensus is that it will hold its policy unchanged, but markets seem to be pricing in a possibility of a pivot.

USD/JPY Levels to watch

The USD/JPY technical outlook, according to the daily chart suggests a neutral to bullish outlook for the short term. On the one hand, indicators give mixed signals, with the Relative Strength Index (RSI) falling below it midline while the Moving Average Convergence Divergence (MACD) prints fading red bars. On the other, the pair trades above the 100 and 200-day Simple Moving Average (SMA), which suggests that the buyers are overall in command, but the Fed’s decision will dictate the short-term trajectory.

Support levels: 140.00,139.10,138.70.
Resistance levels: 141.58 (20-day SMA), 142.00, 143.00.

USD/JPY Daily chart

USD/JPY

Overview
Today last price	140.42
Today Daily Change	-0.49
Today Daily Change %	-0.35
Today daily open	140.91

Trends
Daily SMA20	141.6
Daily SMA50	140.83
Daily SMA100	137.29
Daily SMA200	136.83

Levels
Previous Daily High	141.75
Previous Daily Low	140.85
Previous Weekly High	141.96
Previous Weekly Low	137.68
Previous Monthly High	145.07
Previous Monthly Low	138.43
Daily Fibonacci 38.2%	141.2
Daily Fibonacci 61.8%	141.41
Daily Pivot Point S1	140.59
Daily Pivot Point S2	140.28
Daily Pivot Point S3	139.7
Daily Pivot Point R1	141.48
Daily Pivot Point R2	142.06
Daily Pivot Point R3	142.38

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

GBP/USD flirts with tops near 1.3470

GBP/USD manages to regain composure and challenge the area of daily highs around 1.3470 on Friday. Cable picks up pace despite marginal gains in the Greenback in a context of swelling geopolitical tensions and rising global oil prices.

EUR/USD struggles above 1.1500 despite USD weakness

EUR/USD struggles with its recovery above 1.1500 in European trading on Monday, despite broad US Dollar weakness and improved risk sentiment. The USD loses traction following US President Trump's call off an attack on Iran and that talks between the two sides would happen on Monday. Traders will closely monitor the developments surrounding US-Iran negotiations and US ISM PMI data.

Gold's struggle with 21-day SMA extends ahead of US-Iran talks

Gold keeps its range around $4,050 early Monday, consolidating the previous decline. The US Dollar holds losses, fuelled by the USD/JPY slump and Mideast diplomacy hopes. Gold awaits a clear directional breakthrough, but sellers likely have the upper hand on the 1D chart.

Week ahead: US payrolls report and AI earnings to keep investors on edge

After the Fed decision, NFP report awaited for more rate hike clues. Employment also on the agenda in Canada and New Zealand. Chinese trade and Japanese wage data to be watched too. But Iran and AI headlines to remain in driver’s seat for risk sentiment.

Solana risks a steeper decline below $70 despite steady ETF inflows

Solana (SOL) is trading in the red, losing bullish momentum and remaining capped below its 50-day Exponential Moving Average at $75.68. SOL-focused Exchange Traded Funds show resilience with a monthly inflow of $14.62 million in July, while the near-term retail support wanes with the funding rate turning negative.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.