USD/JPY Price Forecast: Retreats from 155.50 with Fed’s policy in focus

USD/JPY recovers its early losses and flattens around 155.00 ahead of the Fed’s policy.
The Fed is almost certain to hike interest rates by 25 bps to the 3.75%-4.00% range.
Investors also expect the BoJ to raise interest rates this week.

Sagar Dua FXStreet

The Japanese Yen (JPY) turns flat against the US Dollar (USD) at around 155.00 in the European trading session on Wednesday after recovering its early losses. The USD/JPY pair is expected to trade cautiously, with market participants awaiting the Federal Reserve’s (Fed) monetary policy decision at 18:00 GMT.

The market reaction will likely hinge more on signals regarding how much the Federal Reserve (Fed) will tighten its monetary conditions in the near and medium than the interest rate decision.

The impact of Fed’s decision is expected to be limited as traders see an over 90% chance hiking interest rates by 25 basis points (bps) to 3.75%-4.00%.

Regarding the monetary policy outlook, analysts at BNY said that “while we expect a hike on Wednesday, and probably one more this year, we think the path to even higher policy rates is strewn with potential impediments to significantly tighter policy.” In their view, “the nearly 100bp of hikes (equivalent to four hikes of the standard 25bp increment) currently priced in will be realized,” but they caution that, although they are “not ready to see shorter-maturity yields fall any time soon,” these yields “may ultimately prove to be ahead of themselves.”

On the Tokyo front, investors keenly await the Bank of Japan’s policy decision on Friday. The BoJ is highly anticipated to hike interest rates by 25 bps to 1.25%.

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 155.02, keeping a bearish near-term tone as it holds beneath the 20-day Exponential Moving Average (EMA) at 156.41.

The pair’s failure to reclaim this moving average suggests rallies are still being capped by overhead supply, while the Relative Strength Index (RSI) around 39 hints at weak but stabilizing downside momentum rather than outright oversold conditions.

On the topside, the immediate hurdle is the 20-day EMA at 156.41. On the downside, the pair could resume the decline and revisit the monthly low at 152.89.

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

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

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USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

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Cardano's bearish breakout warns of a 15% downside risk

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.