USD/JPY Price Forecast - Yen Holds Near 152.00 as Traders Brace for Fed Rate Cut, BoJ Tightening, and Trump–Xi Trade Talks

USD/JPY Holds Near 152.00 as Fed Rate Cut and BoJ Decision Set the Stage for a Volatile Week

USD/JPY (USDJPY) hovered near 152.00, holding firm despite global dollar weakness as traders positioned for a potentially pivotal week dominated by Federal Reserve and Bank of Japan (BoJ) decisions. The pair briefly dipped to 151.70 before stabilizing, with buyers defending key support ahead of the Fed’s expected 25 bps rate cut and growing speculation of a BoJ policy shift later this week. Yield spreads remain the defining force — U.S. 10-year Treasury yields near 4.0% versus Japan’s 0.75% continue to anchor the carry trade, allowing USD/JPY to stay resilient even as broader dollar sentiment softens.

The Federal Reserve is widely expected to trim rates for a second consecutive meeting, lowering the federal funds range to 3.75%–4.00%, while signaling that balance sheet reduction may soon end. Chair Jerome Powell’s tone will be decisive: a neutral stance could keep USD/JPY above 151.70, whereas a dovish outlook hinting at further cuts could trigger a short-term pullback toward 150.47–149.50.

On the Japanese side, the BoJ faces increasing pressure to tighten. Despite maintaining its policy rate at 0.5%, the central bank is expected to signal a 25 bps hike in December, with markets pricing in a 60% probability of a move by year-end. Prime Minister Sanae Takaichi’s new fiscal expansion plan — aimed at boosting consumption — adds another layer of uncertainty. Should fiscal stimulus ignite inflationary pressure, the BoJ may be forced to act faster, narrowing the U.S.-Japan yield differential and strengthening the yen.

Fed Policy and Trump–Xi Summit Define Market Tone as USD/JPY Balances on Support

The week’s broader narrative extends beyond monetary policy. The upcoming Trump–Xi Jinping meeting in Seoul could ease U.S.–China trade tensions and influence safe-haven demand. Trump’s remarks about potentially easing tariffs and discussing Nvidia’s (NASDAQ:NVDA) Blackwell AI chip exports boosted risk sentiment, sending the Nasdaq and S&P 500 futures to fresh records. In FX markets, this optimism translated into yen weakness, as risk-on appetite typically drives flows out of the low-yielding currency.

Still, traders are cautious. The U.S. government’s partial shutdown, now approaching day 29, has clouded visibility over key labor data, limiting the Fed’s ability to gauge full employment progress. The combination of uncertain fiscal dynamics, falling inflation, and tighter liquidity has prompted Powell to suggest that the Fed could end quantitative tightening (QT) earlier than expected — a dovish step that would weigh on the dollar if confirmed.

If the Fed signals “one and done,” keeping rates steady after this week’s cut, USD/JPY may retest the 153.20 resistance zone and attempt a breakout toward 154.80. Conversely, a dovish Powell combined with a hawkish BoJ could drive the pair below 150.00, where Tokyo may consider intervention if yen appreciation accelerates beyond 149.00.

Technical Setup: Bulls Defend 151.70 While 153.30 Caps Upside Momentum

From a technical perspective, USD/JPY trades in a tight range between 151.70 and 153.30, consolidating above the daily Fair Value Gap (FVG) at 151.73–150.47. The pair maintains a cautiously bullish structure, forming higher lows and signaling accumulation ahead of the Fed decision. Immediate resistance lies near 153.20–153.30, where a breakout could trigger a run to 154.80, the previous swing high.

On the downside, 150.90–151.20 remains initial support, with 150.00 marking a key psychological level. A daily close below 150.47 would invalidate the short-term bullish setup and expose deeper corrections toward 149.50 and 148.80, especially if global risk sentiment turns defensive. Momentum indicators show neutrality, with RSI near 55 and MACD flattening, underscoring the market’s anticipation ahead of central bank events.

BoJ Independence and Fiscal Dynamics Create Policy Tension

The U.S. Treasury Secretary Scott Bessent’s remarks affirming support for BoJ’s independence reinforced expectations that Japan’s central bank will continue policy normalization despite government pressure. This autonomy is viewed as key to preventing excessive yen volatility. At the same time, Japan’s consumer confidence index, projected to rise from 35.3 to 35.6, suggests that domestic spending could strengthen, fueling inflation and forcing a policy shift sooner than anticipated.

If the BoJ tightens faster than expected — particularly with inflation stuck above 2% — markets could see USD/JPY fall below 150, reversing part of its 2025 rally. Yet, the fiscal expansion could delay that move by stimulating imports and offsetting yen strength through trade flows. The Reuters economist poll revealed that 60% of analysts expect a BoJ rate hike to 0.75% by Q4, with 46% predicting it by January 2026.

Macro Divergence: Fed Dovishness Meets Japan’s Hawkish Tilt

The monetary policy divergence between the Fed and BoJ is narrowing. While the Fed is cutting rates to cushion slowing U.S. growth, the BoJ is preparing to normalize policy amid rising domestic demand. This shift may compress the 3.25% yield differential, a key driver of USD/JPY’s 2024–2025 uptrend. If this differential tightens toward 2.5%, carry traders could unwind positions, creating downside pressure.

Still, U.S. yield premiums remain attractive for institutional portfolios. The 10-year vs. JGB spread ensures continued demand for USD/JPY carry trades, particularly if Powell emphasizes data dependency rather than a sustained easing cycle. The pair’s ability to remain near 152.00 despite two consecutive Fed cuts underscores structural USD demand from Japanese importers and pension funds that continue to hedge in dollars.

Trading Outlook: Markets Split Between 155 Breakout and 149 Reversal

With volatility expected to spike following both central bank meetings, USD/JPY faces binary outcomes. A neutral Fed coupled with a cautious BoJ could push the pair toward 154.80, completing a technical extension before intervention risks reemerge. Alternatively, a dovish Fed and a more assertive BoJ could send USD/JPY down to 149.50, breaking the multi-week range and testing the 200-day EMA near 148.80.

Traders are watching the Trump–Xi summit, Fed’s QT comments, and Japan’s BoJ guidance as simultaneous catalysts that could define direction into November. Current open interest positioning suggests speculative longs are trimming exposure, while real-money flows from Japanese institutions remain steady, reflecting cautious but persistent USD demand.

Verdict: HOLD (Neutral Bias While Between 150.50 and 153.50)

USD/JPY continues to consolidate in a pivotal zone as opposing policy paths between the Fed and BoJ create uncertainty. The pair’s resilience near 152.00 reflects entrenched yield-driven support, but a dovish Fed or hawkish BoJ could quickly unwind this balance. Technical structure favors range-bound behavior until one side of the policy spectrum clearly dominates.

Verdict: HOLD — Neutral bias while USD/JPY trades between 150.50 and 153.50; bullish breakout above 153.30 targets 154.80, bearish trigger below 150.47 opens 149.00.

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