USD/JPY Priuce Near 148.00 as Fed Cut Collides With BoJ Hawkish Dissent and ETF Unwind

USD/JPY Holds Near 148.00 as Fed Cuts Collide With BoJ Hawkish Dissent

USD/JPY surged back toward 148.00 after the Federal Reserve delivered a 25 bps rate cut to 4.00%–4.25% and signaled two more reductions this year, bringing projected policy rates to 3.6% by December. The move initially drove a broad U.S. Dollar rally, with the DXY climbing to 97.63, helping the pair erase early losses. Yet the rebound unfolded against a backdrop of growing pressure inside the Bank of Japan, where policymakers Hajime Takata and Naoki Tamura dissented from Governor Ueda’s decision to keep rates steady at 0.5%, calling instead for a 25 bps hike. That internal split marks a pivotal shift in BoJ dynamics, one that could narrow the yawning policy gap between the U.S. and Japan over the coming quarters.

BoJ Balances Rate Freeze With ¥330B ETF Sales

The Bank of Japan did not only hold its policy rate; it also announced plans to begin trimming its risk-asset holdings, including ETFs and J-REITs valued at roughly ¥330 billion annually. This balance sheet reduction, combined with earlier guidance to slow JGB purchases toward ¥3 trillion per month by March 2026, signals a cautious normalization path. Inflation remains at 2.7%, well down from 4% at the start of 2025 but still above target, giving hawks room to argue that stimulus risks a rebound in prices. With dissent already visible, a rate hike to 0.75% cannot be dismissed in the months ahead.

Fed Policy Provides Dollar Tailwind but Market Skepticism Remains

For the U.S., the Fed’s easing was framed by Powell as “risk management,” designed to safeguard labor markets while inflation trends slowly toward target. The immediate market reaction was dollar strength, yet traders are wary of whether sustained rate cuts will erode yield support for the greenback over time. U.S. 10-year yields initially rose despite the Fed’s move, echoing last year’s paradoxical rally when bond markets priced in higher inflation expectations even as policy eased.

USD/JPY Technical Range Between 146.36 and 148.90 in Focus

From a charting perspective, USD/JPY is trapped inside a well-defined range. Key support lies at 146.36, where prior sell-offs stalled, while resistance sits near 148.90, aligning with descending trendline pressure. The 200-period simple moving average rests at 148.60, reinforcing that barrier. Momentum remains neutral, with RSI orbiting 50 and MACD flattening near zero, underscoring indecision. A daily close above 148.90 would expose the critical 150 handle, last seen in mid-2024, while a breakdown below 146.36 could open the path toward 145.47.

Market Positioning Reflects Divided Sentiment

CFTC data show speculative flows have shifted into the dollar on the back of Fed cuts, but yen demand has not collapsed, highlighting resilience. Traders eye Governor Ueda’s forward guidance on ETF unwinds and potential thresholds for pausing normalization. If the BoJ hardens its stance while the Fed accelerates cuts, yield differentials could compress from 375 bps today toward 285 bps by year-end. Such a narrowing would reinvigorate yen demand, threatening the carry trade that has defined USD/JPY strength for much of the past three years.

Macro Risks Define USD/JPY Path Ahead

Beyond policy divergence, broader geopolitical and macro risks remain key. U.S. growth is cooling but still resilient, while Japan’s inflation outlook remains clouded by imported energy costs and wage dynamics. A stronger yen would pressure Japan’s exporters, while a weaker dollar could amplify capital inflows into Asia. Conversely, should U.S. yields rise again despite cuts, the dollar could remain propped above 148, testing 150 once more.

Investment Verdict on USD/JPY

The near-term balance of risks leaves USD/JPY in a delicate stalemate between Fed easing and BoJ normalization. With support at 146.36 holding firm and resistance clustered at 148.90, the technical picture favors range-bound trading unless one central bank delivers a decisive surprise. Given the strong dollar rebound post-Fed and BoJ dissent creating yen tailwinds, the stance is Hold with a slight bullish tilt, watching for a breakout above 148.90 toward 150.00. However, a sudden shift in BoJ policy rhetoric could flip the bias swiftly back in favor of yen strength.

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