USD/JPY Price Forecast: Rises to near 158.00 near 50-day EMA

USD/JPY gains ground for the third consecutive day, trading around 157.70 during the European hours on Tuesday. The currency pair is consolidating after the recent pullback while remaining capped by the medium-term trend filter. Price is now above the nine-period Exponential Moving Average (EMA) but still below the 50-period EMA, which suggests a neutral to slightly bearish near-term tone as the broader upswing pauses under that dynamic resistance.

The 14-day Relative Strength Index (RSI) at 53.48 points to modestly positive momentum, hinting that selling pressure has eased rather than reversed decisively, while the daily technical analysis indicates that the USD/JPY pair is moving upwards within an ascending channel pattern, suggesting a strengthening bullish bias.

Musalem flags need for earlier, incremental hikes as inflation risks stay elevated

The Fed's Musalem delivers a distinctly hawkish tone, with an 8/10 FXS Speechtracker score standing above the 7.4/10 historical average, underscoring a stronger-than-usual push for tighter policy. Musalem warns that without further policy restraint, inflation is likely to remain substantially above the 2% target over the next 18 months, highlighting broad-based price pressures from both demand and supply, including commodity shocks beyond oil such as copper, and noting that even core measures remain “too high” around 3% with business pricing plans anchored closer to 3%. The preference for “earlier and incremental” rate hikes rather than “later and larger” reinforces a bias toward additional increases in the Dollar policy rate despite a labor market judged to be around full employment and not the primary source of inflation pressure.

The FXS Fed Sentiment Index rises by 0.42 points to 149.96, firmly in hawkish territory and consistent with Musalem’s emphasis on the need for further rate hikes to tame persistent inflation. This elevated index level, far above the neutral 100 mark, confirms that the speech adds incremental hawkish weight to the broader Fed narrative tracked by the FXS Speechtracker.

The USD/JPY pair could target the immediate barrier at the 50-day EMA of 158.08, followed by the upper boundary of the ascending channel around 158.60. A successful break above this confluence resistance zone would reinforce the bullish bias and support the pair to explore the region around a nearly 40-year high of 163.99, which was reached on July 23.

On the downside, the primary support lies at the nine-day EMA of 156.41, followed by the lower boundary of the ascending channel around 154.60. A sustained break below the channel would expose the nearly 11-month low of 152.10.

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