USD/JPY declines despite the Fed maintaining a hawkish stance

USD/JPY Drops as Markets React to Central Bank Announcements

The USD/JPY currency pair declined to 158.40 on Thursday as traders digested the latest policy decisions from both the US Federal Reserve and the Bank of Japan. The Federal Reserve opted to keep interest rates unchanged, with Chair Jerome Powell noting that rising energy costs are likely to drive inflation higher. Powell emphasized that unless there is clear progress on inflation, rate cuts are off the table for now—a message that lent support to the US Dollar and reflected a hawkish outlook.

Meanwhile, the Bank of Japan also left its benchmark rate steady at 0.75%, but did so with a notably dovish tone. Eight policymakers voted to maintain the current rate, while only one supported a rate hike. The BoJ reiterated its intention to raise rates further if economic and price conditions evolve as expected, and affirmed its commitment to adjusting monetary policy as needed to achieve its 2% inflation goal in a stable and sustainable manner.

International Response to Strait of Hormuz Tensions

We are prepared to take additional measures to stabilize global energy markets, including collaborating with certain producers to boost supply.

We express our willingness to support efforts that ensure the safe navigation of vessels through the strait.

We urge Iran to immediately halt all threats, the deployment of mines, drone and missile attacks, and any actions aimed at obstructing the strait.

We strongly condemn the recent assaults by Iran on unarmed commercial ships in the Gulf, as stated by Japan and its partners.

Technical Overview

On the 4-hour timeframe, USD/JPY is currently trading at 158.38. The short-term outlook is decidedly bearish, as the pair has slipped beneath the 20-period Simple Moving Average (SMA) near 159.18, though it remains comfortably above the ascending 100-period SMA around 157.94. This suggests that while the broader uptrend is still intact, the pair is undergoing a corrective pullback. The Relative Strength Index (RSI) has dropped toward 37, highlighting fading bullish momentum and signaling increased downward pressure after multiple failed attempts to hold above 159.80.

Looking ahead, immediate resistance is found at 159.05, with a more significant barrier at 159.29, where recent price consolidation coincides with the breached short-term average and may cap any recovery attempts. On the downside, initial support lies at 158.39, protecting a more critical level at 158.06. A decisive move below this threshold could pave the way for a decline toward the 100-period SMA, marking the next key bearish objective.

(This technical analysis was generated with assistance from an AI tool.)