The USDJPY pair is maintaining upward momentum in anticipation of the FOMC decision and the impending trade deal. The USD is experiencing short-term support, driven more by positioning than by fundamentals. Positive news on tariffs and favourable economic data contribute to this trend. However, medium-term depreciation of the US Dollar is expected as the Federal Reserve remains inclined to reduce rates, provided the labour market remains stable.

Japanese Yen Influence

The Japanese Yen is largely influenced by global events and serves as a popular safe haven alongside the Swiss Franc. The Bank of Japan has kept interest rates steady and adopted a dovish stance. Governor Ueda emphasises the significance of trade developments, suggesting that beneficial trade deals could hasten rate hikes, while disappointing outcomes may cause delays.

On the technical front, the USDJPY daily chart indicates a pullback from the 140.00 level. In the 4-hour timeframe, a strong support zone appears around the 144.00 handle, with buyers likely to step in. The 1-hour chart shows price testing the support zone, where buyers might place orders near the trendline. Upcoming catalysts include the US ISM Services PMI, FOMC Rate Decision, US Jobless Claims figures, and Japanese wage data.

The analysis so far establishes that the Dollar is enjoying upward drift, not due to inherent economic strength, but rather because of how traders have positioned themselves ahead of expected news. Ideas around trade agreements and short-term data releases have inflated the currency’s appeal, temporarily overriding the longer-term path, which still points lower if the US central bank continues on a slower rate trajectory. The assumption being made is that inflation is stable enough and the labour market doesn’t wobble—otherwise, the playbook changes again.

Meanwhile, the Yen’s position is far more reactive. It thrives in times of uncertainty, often appreciating when risk sentiment weakens. Its central bank has done little to change that—it’s remained passive on the rate front, all while keeping conditions loose in order to spur demand. Ueda, for his part, has drawn attention to trade negotiations, implying better terms abroad could push the domestic institution to reconsider the timing of hikes, though such moves wouldn’t come swiftly. He’s cautious, and he’s telegraphing that clearly.

Technical Interpretation

Technically, recent price activity suggests a mild retreat from earlier highs, which could invite interest from those looking to either fade strength or re-enter long. Around the 144.00 level, there’s historical buying interest based on recent chart behaviour, with shorter-term charts confirming tests of that zone. Traders watching smaller intervals, particularly on the hourly time frame, would be noting how price interacts with a rising trendline.

From our view, the next few sessions carry proper directional potential, given that macro inputs are clustered close together. Services sector data, central bank commentary, weekly jobless figures, and Japan’s pay metrics—none of these are just noise. If any of them deviate sharply from what’s priced, positioning could switch abruptly. In particular, optionality around support zones and how the pair moves in those clusters needs monitoring.

We’d give deeper weight to how rate expectations shift after the Fed release and whether updated wage prints in Japan support or temper speculation about a pivot towards tightening. Markets are no longer focused solely on headline prints—it’s the narrowing or widening of rate differentials that often makes the chart move. And this pair is an excellent measure of cross-border monetary contrasts.

Buy-side desks watching whether bulls defend hourly lows might draw conclusions about near-term sentiment, especially if momentum fails to break lower despite weak triggers. If appetite remains shallow, short-term sellers are likely scaling back, waiting instead for cleaner trend confirmation. Given how compressed volatility has been leading into decisions, one-way moves post-announcement may appear exaggerated. This is something we’ve seen before during tightly-spaced catalyst periods.

Create your live VT Markets account and start trading now.