The dollar is pushing higher against the yen, with USD/JPY tapping a one-and-a-half-week high near 148.70 during Tuesday’s Asian session. But while the pair has extended its rally for a fourth day, traders are getting cautious with two major central bank meetings just around the corner.
Here’s what you need to know so far:
1. USD/JPY Climbs But Stalls Into Event Risk
After days of consistent buying, USD/JPY finally ran into resistance around the 148.70 zone. The pair has been in demand as traders unwind yen longs and the U.S. dollar finds support from solid data. But despite the rally, fresh upside may be limited until the dust settles from this week’s policy meetings, with the Fed decision due Wednesday and the BoJ following on Thursday.
Both central banks are expected to keep rates steady, but markets will be laser-focused on forward guidance and press conference tone, especially from the BoJ.
2. Fed Expected to Hold But Watch the Dots
The Fed is expected to keep its benchmark interest rate unchanged despite calls from the White House for 'dramatically lower' borrowing costs.
— #Semafor (#@semafor)
12:06 PM • Jul 28, 2025
The Federal Reserve is widely expected to keep interest rates unchanged, with recent U.S. economic data not providing any major shocks. Markets have already priced out a July cut, but traders still want clarity on whether the Fed’s next move will be a cut in September, or a prolonged pause.
Any hints from Chair Powell on inflation stickiness, labor market tightness, or balance sheet tweaks could shake the dollar sharply. If the Fed leans hawkish, USD/JPY could make a serious run toward 150.
3. BoJ in a Bind: Inflation, Yen, and Politics
Bank of Japan Likely on Hold Though U.S. Trade Deal Cuts Uncertainty
— #Real Time Economics (#@WSJecon)
4:04 AM • Jul 29, 2025
On the other side of the equation, the Bank of Japan remains stuck. Despite Governor Ueda’s recent efforts to normalize policy, signs of cooling inflation and rising political uncertainty are making an immediate rate hike less likely. Combine that with broad trade optimism easing safe-haven demand for the yen, and JPY has little to support it in the near term.
Markets are also jittery over the BoJ’s reaction to recent yen weakness. Will Ueda push back verbally? Will we see any changes in the forward guidance? Lots of us traders are bracing for some kind of volatility.
4. Technical Outlook: Holding the High Ground
From a technical standpoint, USD/JPY remains well-supported above the 148.00 handle. Monday’s bullish candle confirmed a break out of consolidation, and the next hurdle sits near 149.00–149.20. If bulls manage to clear that, the door reopens toward the 150.00 psychological zone.
Support remains firm at 147.70 and 146.50, with stronger footing near the 100-day EMA. Until either central bank surprises the market, we should expect two-way volatility within a wide range.
Here’s the Takeaway:
USD/JPY is dancing just below major resistance, buoyed by Fed confidence and a shaky yen. But with Powell and Ueda both on deck, the next 72 hours could redefine direction for this pair. If the Fed holds firm while the BoJ stays cautious, the yen could come under renewed pressure, especially if U.S. data cooperates.
Just don’t get caught leaning too far in one direction before the fireworks begin.