CFD Trading Rate US Dollar vs Japanese Yen (USDJPY)

Strong momentum suggests further US Dollar (USD) strength; the major resistance at 145.50 is likely out of reach. In the longer run, sharp advance reinforces view that USD could recover further to 145.50, UOB Group FX strategists Quek Ser Leang and Peter Chia note.

USD can recover further to 145.50

24-HOUR VIEW: “Our view for USD to trade in a 141.50/143.80 range last Friday was incorrect. USD dipped to a low of 141.72 and then lifted off, surging to a high of 144.49. While the rally is reaching overbought levels, strong momentum suggests further USD strength. However, any further advance is unlikely to reach the major resistance at 145.50 (there is another resistance level at 144.80). To keep the momentum going, USD must remain above 143.10 with minor support at 143.60.”

1-3 WEEKS VIEW: “Last Thursday (19 Sep), when USD was trading at 143.00, we indicated that ‘if USD can break clearly above 144.00, it could trigger a stronger recovery towards 145.50.’ We added, ‘the likelihood of USD breaking clearly above 144.00 will remain intact, provided that the ‘strong support’ level at 141.00 is not breached.’ On Friday, USD broke clearly above 144.00, reaching a high of 144.49. The sharp advance reinforces our view that USD could recover further to 145.50. On the downside, the ‘strong support’ level has moved higher to 141.90 from 141.00.”

• USD/JPY on track for a positive weekly close, yet still under key resistances, maintaining the downtrend.
• Resistance challenges include Kijun-Sen at 144.40 and Ichimoku Cloud; 50-DMA approaching a bearish cross with 100 and 200-DMAs.
• Buyer momentum builds with RSI rising, though remains below the critical 60 mark needed to overturn the downtrend.
• Potential upside targets 145.00 and the September 3 high at 147.21; a drop below 143.00 could test support at 142.04 (Tenkan-Sen).

The USD/JPY registers gain for back-to-back days, yet it remains shy of decisively cracking the 144.00 figure despite registering a weekly high of 144.49. At the time of writing, the pair exchanged hands at 143.96, up by 0.93%.

USD/JPY Price Forecast: Technical outlook

The pair is set to end the week positively, but the downtrend remains. The USD/JPY has failed to reclaim the Kijun-Sen at 144.46, and price action remains below the Ichimoku Cloud (Kumo).

In fact, the trend could accelerate as the 50-day moving average (DMA) crosses below the 100 and 200-DMAs, with the former closing the gap with the latter.

Momentum favors buyers as the Relative Strength Index (RSI) aims upward. However, it remains far from testing the 60 level, which is usually sought as a crucial break to change the USD/JPY ongoing downtrend.

Short-term, the USD/JPY could extend its gains, with the Kijun-Sen seen as first resistance at 144.40. A breach of the latter will expose the 145.00 figure, followed by the September 3 high at 147.21, followed by the 50-DMA at 147.56.

Conversely, if USD/JPY extends its losses past the 143.00 figure, the next support would be the Tenkan-Sen at 142.04.

USD/JPY Price Action – Daily Chart

• USD/JPY surges above 144.00 as BoJ refrains from committing pre-defined rate hikes in this year.
• Japan’s National CPI rose to 3% in August.
• Traders see the Fed cutting interest rates further by 75 bps to 4.00%-4.25%.

The USD/JPY delivers a sharp rally to near 144.00 in Friday’s European session. The asset strengthens as the Japanese Yen (JPY) weakens after the Bank of Japan’s (BoJ) monetary policy announcement. The BoJ kept interest rates in the range of 0.15%-0.25%, as expected, but did not endorse the need of more hikes in the remaining year, which was widely anticipated by market participants.

BoJ Governor Kazuo Ueda said, "Our decision on monetary policy will depend on economic, price and financial developments at the time. Japan's real interest rates remain extremely low. If our economic and price forecasts are achieved, we will raise interest rates and adjust the degree of monetary support accordingly," at the press conference.

Going forward, market speculation for more BoJ rate hikes is expected to remain firm as the Japan’s National Consumer Price Index (CPI) data for August came in higher at 3% than 2.8% in July. The National CPI data excluding fresh food grew expectedly by 2.8%, faster than the prior release of 2.7%.

Meanwhile, a mild recovery in the US Dollar (USD) has also pushed the asset higher. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, bounces back to near 100.85 from the intraday low of 100.40.

The near-term outlook of the US Dollar is expected to remain uncertain as traders expect the Federal Reserve (Fed) to continue with an aggressive policy-easing cycle. The CME FedWatch tool shows that the central bank will reduce interest rates further by 75 basis points (bps) in the remaining two policy meetings this year.

The Fed delivered its first interest rate cut decision in more than four years on Wednesday in which it cut its key borrowing rates by 50 bps to 4.75%-5.00%.

Upward momentum is building; if the US Dollar (USD) can break above 144.00, it could trigger a stronger recovery towards 145.50, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Bulls can push above 144.00 and towards 145.50

24-HOUR VIEW: “We indicated yesterday that USD ‘has potential to test the major resistance at 144.00.’ USD subsequently rose to 143.94, closing at 142.62 (+0.25%). Slowing momentum, combined with overbought conditions suggests USD is unlikely to rise further. Today, we expect USD to trade in a range of 141.50/143.80.”

1-3 WEEKS VIEW: “Our update from yesterday (19 Sep, spot at 143.00) remains valid. As highlighted, if USD can break clearly above 144.00, it could trigger a stronger recovery towards 145.50. The likelihood of USD breaking clearly above 144.00 will remain intact, provided that the ‘strong support’ level at 141.00 is not breached.”

• USD/JPY's ‘shooting star’ candlestick hints at a possible bearish continuation despite current buyer momentum.
• Key supports: September 19 low at 141.88, 140.44, and YTD low at 139.58.
• Buyers need to surpass 143.94 resistance, with next target at Kijun-Sen at 144.48 for bullish control.

The USD/JPY held on to gains following Wednesday’s Federal Reserve decision but traded well below its daily peak of 143.94 as the Greenback registered losses.

Data-wise, the US docker featured initial jobless Claims for the last week, which fared better than expected but failed to boost the US Dollar. Meanwhile, traders eye the release of Japanese inflation data and the Bank of Japan's monetary policy decision.

USD/JPY Price Forecast: Technical outlook

The downtrend is set to continue despite recovering some ground. As Thursday’s session finishes, the USD/JPY retreated from the weekly high, forming a ‘shooting star’ candlestick. This means that bears are stepping into the market, paving the way for a re-test of the year-to-date (YTD) low of 139.58.

In the short term, momentum favors buyers, as depicted by the Relative Strength Index (RSI), though in the long term, the RSI is bearish.

For a bearish continuation, the USD/JPY must clear the September 19 low of 141.88, immediately followed by the Tenkan-Sen at 141.76. Those levels cleared, and the next demand zone would be the September 18 daily low of 140.44, followed by the YTD low of 139.58

Conversely, buyers must clear the September 19 high of 143.94 before testing the Kijun-Sen at 144.48.

 USD/JPY Price Action – Daily Chart

The US Dollar (USD) has potential to test the major resistance at 144.00. In the longer run, upward momentum is building; if USD can break above 144.00, it could trigger a stronger recovery towards 145.50, UOB Group FX analysts Quek Ser Leang and Victor Yong note.

USD/JPY can test 144.00 near term

24-HOUR VIEW: “Yesterday, we held the view that ‘as long as USD remains above 140.90, it could test 142.80 before leveling off.’ The subsequent price action did not turn out as we expected, as USD plummeted briefly to 140.43 in NY trade and then surged to close largely unchanged at 142.27 (-0.09%). USD continues to advance in early Asian trade today and could potentially test the major resistance at 144.00. On the downside, support can be found at 141.70 (minor support is at 142.40).”

1-3 WEEKS VIEW: " We indicated yesterday (18 Sep, spot at 142.00) that the recent USD weakness has stabilised. We expected USD to trade in a range between 140.00 and 144.00. USD traded on a firm note in Asian trade today, and upward momentum is building. From here, if it can break clearly above 144.00, it could trigger a stronger recovery towards 145.50. The likelihood of USD breaking clearly above 144.00 will remain intact, provided that the ‘strong support’ level at 141.00 is not breached.”

• USD/JPY edges higher to 143.55 in Thursday’s Asian session, up 0.90% on the day. 
• The Fed lowered interest rates for the first time in more than four years with a bigger-than-usual reduction. 
• The BoJ is anticipated to stand pat at its policy meeting on Friday. 

The USD/JPY pair gains traction around 143.55 on Thursday during the early European session. The uptick of the major pair is bolstered by the recovery of the US Dollar (USD). Investors will shift their attention to the Bank of Japan (BoJ) interest rate decision on Friday. 

The Federal Reserve (Fed) cut its interest rates by 50 basis points (bps) to 4.75%- 5.00% at the September meeting on Wednesday. Fed Chairman Jerome Powell stated during the press conference that the move was "strong" but needed as price rises ease and job market concerns grow.

Fed policymakers lowered their GDP growth forecast for 2024 to 2%, down from the previous projection of 2.1%. Fed officials raised their projection for the long-run federal funds rate to 2.9% from 2.8%. The Greenback swung between gains and losses after the Fed decision. 

Meanwhile, the USD Index (DXY), a measure of the USD's value relative to the majority of its most significant trading partners, bounces off multi-month lows and reclaims the 101.00 barrier, gaining 0.20% on the day. However, the dovish stance of the US Fed and the expectation of additional rate cuts this year could weigh on the USD and limit the upside for the pair. 

On the other hand, the BoJ is widely expected to keep interest rates on hold at its two-day meeting ending Friday. Nonetheless,  a majority of economists polled by Reuters expect an increase by year-end. Since the Fed started its easing monetary policy in the September meeting, a narrowing gap between the US and Japanese interest rates might lift the Japanese Yen (JPY) against the USD. 

• USD/JPY dips on reaction to 50 bps Fed rate cut.
• Fed's dot plot on rate outlook also declined.
• Markets await Fed Chair Powell's press conference appearance.

USD/JPY plumbed the depths of 140.80 on Wednesday after the Federal Reserve (Fed) dropped a 50 bps rate cut on markets. This marks the Fed's first rate cut in over four years as US central bank policymakers race to catch up to market expectations. Investors had initially hoped for a first rate cut from the Fed in March.

The Federal Reserve's dot plot, part of the Federal Open Market Committee's (FOMC) Summary of Economic Projections, has been revised downward from the central bank's previous rate outlook. The median policy expectations from the Fed now indicate that the Fed Funds rate is projected to be 4.4% by the end of 2024 and 3.4% by the end of 2025, down from 5.1% and 4.1% respectively.

Digging deeper into the Fed's notes, Fed policymakers now anticipate US Gross Domestic Product (GDP) growth to remain at 2.0% through 2024, down from the previous projection of 2.1% in June. Fed officials also expect the US Unemployment Rate to settle around 4.4% by the end of 2024.

With the Fed aligning with market expectations for rate cuts, global markets are now turning their attention to Fed Chair Jerome Powell's press conference scheduled to take place shortly.

More to come...

USD/JPY 15-minute chart

• USD/JPY downtrend persists, with the RSI favoring sellers ahead of the Fed's rate cut decision.
• A 25-bps Fed rate cut could push USD/JPY higher toward 142.47, with potential to target the 143.00 figure.
• A 50-bps cut could lead to a retest of 140.32, with further downside aiming for the YTD low of 139.58.

The USD/JPY dropped after reaching a four-day high of 142.47, yet it remains range-bound during the North American session. The rise in US Treasury yields and a soft US Dollar keeps the pair trapped within the September 17 trading range. Therefore, the major trades at 141.88, losses 0.36%

USD/JPY Price Forecast: Technical outlook

The USD/JPY downtrend remains in place, but the Federal Reserve’s decision to cut rates by a smaller or larger size could trigger different reactions. The Relative Strength Index (RSI) favors sellers, hence further downside.

If the Fed lowers rates by 25 basis points, this could be bullish for the USD/JPY and push prices toward the September 17 high at 142.47, which, if cleared, will expose the 143.00 figure.

On the other hand, a 50 bps rate cut could allow the September 17 low of 140.32 to be retested and pave the way for the challenge of the year-to-date (YTD) low of 139.58.

USD/JPY Price Action – Daily Chart

USD/JPY was last seen at 141.63 levels. The pair rebounded, alongside higher UST yields after better-than-expected US data. FOMC decision should see USD/JPY more volatile, OCBC FX analysts Frances Cheung and Christopher Wong note.

FOMC to trigger USD/JPY volatility

“USD/JPY rebounded, alongside higher UST yields after US data came in better than expected.”

“Daily momentum is not showing a clear bias while RSI rose. Bias to the downside but still cautious of near term rebound risks. Resistance at 143.67 (21 DMA), 144.60 (23.6% fibo retracement of 2023 low to 2024 high). Support at 140.50, 139.60 and 138 levels.”

“FOMC decision should see USD/JPY trade wild into and post-decision, press conference.”

• USD/JPY slides below 142.00 as firm speculation for Fed large interest rate cuts weighs on the US Dollar.
• Market participants expect the Fed to cut interest rates by 100 bps this year.
• Investors expect the BoJ to maintain interest rates steady at 0.25% on Friday.

The USD/JPY pair drops below 142.00 in Wednesday’s European session. The asset faces selling pressure after a recovery move to near 142.47 as the US Dollar (USD) slumps ahead of the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT.

The market sentiment remains cheerful as the Fed is almost certain to start reducing interest rates. S&P 500 futures have posted decent gains in European trading hours. The US Dollar Index (DXY), which tracks the greenback’s value against six major currencies, falls back to near 100.70 from Tuesday’s pullback move to 101.00. However, 10-year US Treasury yields jump above 3.67%.

While the Fed is poised to cut interest rates, investors will keenly focus on the potential rate cut size and the dot plot, which shows where policymakers see Federal Fund rates heading in short and long term.

According to the CME FedWatch tool, the likelihood of the Fed reducing interest rates by 50 basis points (bps) to 4.75%-5.00% has increased to 63% from 14% a week ago. For the year-end, traders expect that the Fed will cut interest rates by 100 bps. This suggests that the Fed will cut interest rates by 50 bps in one of its three meetings remaining this year.

In Asia, the Japanese Yen (JPY) will be influenced by the Bank of Japan’s (BoJ) monetary policy decision on Friday. The BoJ is widely anticipated to leave interest rates unchanged at 0.25%, with a hawkish guidance due to steady economic growth and the stability of inflation above 2% for the straight 21 months.

Last week, BoJ policymaker Naoki Tamura projected interest rates to rise at least 1% as early as the second half of the next fiscal year. 

Meanwhile, Japan’s economic assessment report for September, released on Wednesday, showed that the economy is recovering moderately although it is still pausing in parts, Reuters reported.

As long as the US Dollar (USD) remains above 140.90, it could test 142.80 before leveling off. In the longer run, the USD weakness seems to have stabilised; it is expected to trade in a range between 140.00 and 144.00 for now, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

USD/JPY to trade 140.00 and 144.00 long term

24-HOUR VIEW: “On Monday, USD fell sharply to 139.56, then rebounded. Yesterday, we indicated that ‘the rebound in severely oversold conditions and slowing momentum indicates that instead of continuing to weaken, USD is more likely to trade in a sideways range of 140.10/141.40.’ However, after dipping to a low of 140.30, USD lifted off and soared to 142.47, closing on a strong note at 142.40 (+1.28%). The rapid rise appears to be running ahead of itself. That said, as long as USD remains above 140.90 (minor support is at 141.40), USD could test 142.80 before leveling off. The next resistance at 144.00 is not expected to come into view.”

1-3 WEEKS VIEW: “While USD fell and broke below the round-number support of 140.00 two days (low of 139.56), we pointed out yesterday (17 Sep, spot at 140.70) that ‘downward momentum has not increased much.’ However, we indicated that ‘the weakness has not stabilised, and USD could continue to weaken even though it remains to be seen if 139.00 is within reach this time round.’ We added, ‘a breach of 142.20 would indicate that the weakness has stabilised.’ We did not anticipate USD to rise strongly as it soared to a high of 142.47. The recent USD weakness seems to have stabilised. For the time being, we expect USD to trade in a range between 140.00 and 144.00.”

• USD/JPY meets with a fresh supply and reverses a part of the overnight recovery gains.
• The divergent Fed-BoJ policy expectations underpin the JPY and exert some pressure.
• Investors look to the critical Fed decision ahead of the key BoJ policy update on Friday. 

The USD/JPY pair attracts fresh sellers during the Asian session on Wednesday and slides back below the 142.00 mark in the last hour, eroding a part of the overnight gains and stalling its recovery from the lowest level since July 2023 touched earlier this week. Meanwhile, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside, though traders might refrain from placing aggressive bets ahead of the key central bank event risks.

The Federal Reserve (Fed) is scheduled to announce its decision at the end of a two-day meeting later this Wednesday and is universally expected to kick start its policy easing cycle. The market attention will then shift to the Bank of Japan (BoJ) policy update on Friday, which will play a key role in influencing the Japanese Yen (JPY) and provide a fresh directional impetus to the USD/JPY pair. In the meantime, the cautious market mood, along with the divergent Fed-BoJ policy expectations, drives some haven flows towards the JPY and turns out to be a key factor exerting downward pressure on the USD/JPY pair. 

The markets have been pricing in a greater chance of an oversized, 50 basis points (bps) interest rate cut by the Fed amid signs of easing inflationary pressures. This overshadows Tuesday's better-than-expected release of the US Retail Sales data and fails to assist the US Dollar (USD) to build on the overnight bounce from the 2024 low. In contrast, the recent hawkish signals from BoJ officials suggest that the Japanese central bank will hike rates again by the end of this year. This has been a key factor behind the JPY's recent relative outperformance and contributes to the offered tone surrounding the USD/JPY pair. 

The JPY bulls, meanwhile, seem rather unaffected by Japan's August trade data, which showed a big miss for both exports and imports. According to the official data, Japan's exports rose for a ninth straight month, by the 5.6% YoY rate in August, but at a much slower-than-expected pace. This was accompanied by a substantially smaller-than-expected growth of 2.3% in imports, albeit did little to dent the underlying bullish sentiment surrounding the JPY. This, in turn, validates the near-term negative outlook for the USD/JPY pair and supports prospects for an extension of the recent well-established downtrend.

• USD/JPY climbs over 180 pips, testing key resistance at 142.35 (Tenkan-Sen).
• A break above 143.04 could target resistance at 143.15 (Senkou Span A) and 144.48 (Kijun-Sen).
• A drop below 142.00 could see the pair resume its downtrend, with support at 139.58 (YTD low) and 139.00.

The USD/JPY skyrocketed late in the North American session, trading at 142.44, up by over 1% after bouncing off a daily low of 140.32. Solid US data added to investors' uncertainty about the size of a Federal Reserve rate cut as they eyed its monetary policy decision on Wednesday. Therefore, traders shorting the US Dollar trimmed their positions, as seen as price action in the USD/JPY pair.

USD/JPY Price Forecast: Technical outlook

From a technical perspective, the USD/JPY is still downward biased despite rising over 180 pips to test the Tenkan-Sen at 142.35. The Relative Strength Index (RSI) remains bearishly biased, though aimed up, but has turned flat as Wednesday’s Asian session looms.

If USD/JPY climbs above the September 12 daily high of 143.04, this could pave the way for a leg-up, exposing key resistance levels: the Senkou Span A at 143.15, followed by the Kijun-Sen at 144.48.

However, if USD/JPY drops below 142.00, it will exacerbate a resumption of the downtrend. The following support would be the year-to-date (YTD) low of 139.58, followed by the 139.00 mark.

USD/JPY Price Action – Daily Chart

The US Dollar (USD) is likely to trade in a sideways range of 140.10-141.40 against the Japanese Yen (JPY), UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note. In the longer run, downward momentum has not increased much, they say, adding that the USD could continue to weaken but that it remains to be seen if 139.00 is within reach.

USD could continue to weaken towards 139.00

“USD fell below 140.00 yesterday, reaching a 14-month low of 139.56. USD rebounded strongly from the low to close slightly lower at 140.60 (-0.16%). The rebound in severely oversold conditions and slowing momentum indicates that instead of continuing to weaken, USD is more likely to trade sideways. Expected range for today: 140.10-141.40.”

“While USD fell and broke below the round-number support of 140.00 yesterday (low of 139.56), downward momentum has not increased much. However, the weakness has not stabilised, and USD could continue to weaken even though it remains to be seen if 139.00 is within reach this time round. On the upside, a breach of 142.20 would indicate that the weakness has stabilised.”

• USD/JPY rebounds to near 140.80 in Tuesday’s early Asian session. 
• The US Fed is widely expected to cut interest rates at the conclusion of its meeting Wednesday.
• Analysts see no change in rates at the BOJ meeting on Friday.

The USD/JPY pair recovers some lost ground near 140.80, snapping the five-day losing streak during the early Asian session on Tuesday. However, the upside of the pair might be limited amid the growing expectation that the US Federal Reserve (Fed) will start its easing cycle at the September meeting. Later this week, the US Fed and the Bank of Japan (BoJ) monetary policy meeting will be in the spotlight. 

The US Dollar (USD) remains under pressure as Fed easing expectations intensify. Fed Chair Jerome Powel signaled at the Kansas City Fed’s annual economic symposium in Jackson Hole last month that inflation had come under control just enough for the Fed to finally feel comfortable dialing back policy. Powell added that the job market’s fragile health is a key reason why the Fed is poised to act. 

The market ramps up expectations for a jumbo 50 basis points (bps) cut at the September Fed meeting on Wednesday, with nearly 67% odds pricing in, up from 50% last Friday. Ahead of the key interest rate decision from both the US and Japan, the US Census Bureau will release the Retail Sales report on Tuesday. The figure is estimated to increase by 0.2% MoM in August versus 1.0% prior. 

On the other hand, the BoJ is not expected to raise interest rates on Friday, but a majority of economists polled by Reuters expect a hike by year-end. Richard Kaye, a portfolio manager for Japan equities at Comgest, noted "The main determinant of the yen is the rate or yield gap with the U.S., and the main actor in that is the Fed, and the Fed seems ready to cut."
 

• USD/JPY recovers after diving to a YTD low; a daily close above 140.25 paves the way for further upside.
• Key resistance levels include 142.57 (Tenkan-Sen), 143.52 (Senkou Span A), and 144.48 (Kijun-Sen).
• Momentum remains bearish, but bullish patterns like a ‘dragonfly doji’ or ‘hammer’ could signal a leg higher if confirmed.

The USD/JPY recovers some ground late in the North American session after touching a new year-to-date (YTD) low of 139.58 earlier in the day. At the time of writing, the major pair traded at 140.85 and registered minimal gains of 0.03%.

USD/JPY Price Forecast: Technical outlook

The downtrend would likely continue after clearing December’s 28 low of 140.25, but USD/JPY buyers bought the dip, clearing the latter as the pair aims towards 141.00.

A daily close above 140.25 would open the way to testing key resistance levels amid a busy week of monetary policy decisions from the Federal Reserve and the Bank of Japan.

Momentum hints that sellers remain in control, as shown by the Relative Strength Index (RSI). But if Monday’s price action completes a ‘dragon-fly doji’ or a ‘hammer,’ look for a leg up.

On further strength, USD/JPY's first resistance would be the Tenkan-Sen at 142.57, followed by the Senkou Span A at 143.52. If those levels are cleared, buyers can aim for the Kijun-Sen at 144.48.

Conversely, if sellers drag prices below 140.25, that can pave the way for further downside.

USD/JPY Price Action – Daily Chart

• USD/JPY slides sharply to near 139.50 with all eyes on the Fed policy.
• Market expectations for Fed large interest rate cuts have strengthened.
• The BoJ is expected to leave interest rates at 0.25% on Friday.

The USD/JPY pair posts a fresh annual low at 139.50 in Monday’s North American session. The asset weakens ahead of the monetary policy decisions by the Federal Reserve (Fed) and the Bank of Japan (BoJ), which will be announced on Wednesday and Friday, respectively.

The market sentiment remains cheerful as the Fed is almost certain to pivot to policy-normalization from Wednesday. This would be the first interest rate cut decision by the Fed in over four years since it announced the battle against rising inflation due to pandemic-led stimulus.

Meanwhile, the debate over the Fed’s likely interest rate cut size has taken a U-turn. Market expectations for the Fed reducing interest rates by a big margin, which were significantly lower last week before the release of the United States (US) Producer Price Index (PPI), have strengthened. The CME FedWatch tool shows that the probability of the Fed cutting interest rates by 50 basis points (bps) rose to 65% from 30% a week ago.

The US PPI report showed that the annual headline producer inflation decelerated at a faster-than-expected pace to 1.7%, the lowest in six months.

Apart from the interest rate decision, investors will also focus on the Fed’s dot plot, which will indicate interest rate projections for different timeframes by all officials. The CME FedWatch tool also shows that the central bank will cut interest rates atleast by 100 bps this year.

In the Tokyo region, investors see the BoJ keeping interest rates steady but maintaining hawkish guidance on sustaining inflationary pressures and growth prospects. The BoJ has pushed its interest rates to 0.25%. Analysts at Standard Chartered see the BoJ interest rates rising to 0.5% by the year-end. The confidence of market experts has increased due to inflation remaining above 2% for the past 21 months.

USD/JPY is looking to test 140, DBS FX strategist Philip Wee notes.

BoJ to maintain its commitment to hike rates again

“USD/JPY is looking to test its crucial support level at 140 after ending last week at 140.85, its lowest closing level since July 2023.”

“Barring any hawkish surprises from the Fed, the Bank of Japan will likely maintain its commitment to hike rates again at its meeting on September 20.”

“With US data supporting a soft-landing outlook, a repeat of August’s acute market volatility due to an unwinding of yen carry trades is unlikely.”