USD/JPY is trading just below key resistance, with momentum appearing to slow. Mixed signals from both the Federal Reserve and the Bank of Japan influence the pair as it remains range-bound.

The pair, at 145.13, reflects a decline of 0.47%, showing fatigue after a three-week rally amid mixed sentiment. Market indecision arose due to evolving economic conditions and monetary policy expectations.

Federal Reserve And Bank Of Japan Influence

Inflation remains high, resulting in the Federal Reserve’s cautious stance on rate cuts. Meanwhile, the Japanese Yen weakens due to the Bank of Japan’s loose policy, although recent interventions have caused Yen volatility.

Risk sentiment and Treasury yields continue to impact USD/JPY movements. The daily chart displays a recovery, moving past the 144.00 psychological level and reaching 146.19, before retreating.

Momentum faded at the 50-day SMA, leading to stabilization around 145.00. This compression suggests potential for a breakout or breakdown, with the RSI indicating slight bullish momentum.

On the weekly chart, a maturing rally is shown, with a spinning top candlestick signalling market indecision. Resistance converges at the 10-week and 50-day SMAs, while support lies between 144.37 and 143.19.

Momentum And Market Indecision

A breakout above 146.34 could drive bullishness, targeting 147.09. Conversely, dropping below 144.37 shifts focus toward lower levels.

From what we’ve observed, the current movement in USD/JPY speaks to hesitation rather than direction, an environment where short bursts of optimism are quickly met with equal parts caution. With the pair settling back near the 145.00 handle, old resistance and recent momentum seem to have caught up with each other, grinding the rally to a pause. The climb past 144.00 was encouraging for bulls — a sign that momentum hadn’t fully evaporated — but there’s now clear friction at the moving averages.

One key takeaway here is that policy divergence alone isn’t steering price action as effectively as before. Markets seem wary of reading too much into headline inflation data or central bank language that lacks a hard edge. With US inflation still elevated, Powell’s team remains reluctant to greenlight rate cuts. On the other side, there’s further strain on the Japanese Yen as Ueda maintains loose policy settings, despite a couple of suspected interventions by officials that caused noticeable spikes. These aren’t new forces, but traders are finding them less convincing as standalone catalysts.

Price stalling just under 146.00, especially after the short-lived push to 146.19, highlights a market that lacks the momentum to proceed, but also doesn’t appear keen on retracing too far unless given a clear nudge. That 50-day SMA where the rally lost steam is now a focal point — not because it’s an ultimate barrier, but because it’s where buying confidence visibly fades.

If the current compression around 145.00 continues, thinner liquidity during lower-volume sessions could give us the volatility spark needed to break directionally. Option flows and positioning near the 146.00-146.30 zone suggest sellers are active, capping topside attempts. Meanwhile, downside appears buffered by bids closer to 144.40, creating a narrowing corridor.

The RSI, though mildly positive, isn’t compelling enough to give bias. It suggests positive pressure but doesn’t scream conviction. We see this often before sharp breaks — when sentiment consolidates but fails to commit. That spinning top candlestick on the weekly view mirrors what’s happening intraday: volume dries up, the tug of war intensifies, and markets end the week not knowing whether they’ve gained or lost ground.

Traders can look at 146.34 as a line in the sand. Not because there’s anything magical about it — but because movement above there hasn’t been sustained in this cycle. Should we see daily closes above, it would force short-term bears to unwind quickly, likely ushering price toward 147.00 or above, where the last real congestion was noticed.

In contrast, if vulnerability increases and price closes under the 144.37-143.19 support band, it would mark a more decisive shift back into seller control. That zone has acted as a kind of soft floor; breaking through it would raise the likelihood of follow-through into deeper retracement levels. Keep a close watch on Treasury yields during that phase — they’ve had a reliable correlation with Yen movements, and any dovish lean in fixed income might accelerate things.

For now, straddling within a defined area remains the most logical scenario. We shouldn’t be surprised by week-long periods of false starts. However, the more that price compresses without a broader catalyst, the more likely an eventual outsized move becomes — one way or the other. Prepare for a break, but don’t jump until price confirms; charts may tease, but they rarely lie when they finally move.

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