- BoJ holds rates as the Yen struggles.
- Fed decision could Weigh on the US dollar.
- USD/JPY faces key resistance at 150.00.
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The USD/JPY pair remained firmer in the session as the Bank of Japan opted to keep rates unchanged at 0.5%, a decision that was widely expected by markets. The BoJ’s tone was cautious amid rising wage pressures and ongoing inflationary trends. Governor Ueda stopped short of signaling a near-term hike, leaving the yen vulnerable—at least for now.
Despite the yen’s underperformance following the announcement, the BoJ governor subtly acknowledged that external risks, particularly surrounding global trade tensions, are influencing its policy stance. With US tariffs looming large, the central bank head noted that they intend to reassess the situation in early April. This leaves the door open for action at the next meeting, even as consensus forecasts suggest the more likely timing for a hike could fall between June and September.
Could the BoJ deliver a hike before the summer?
Just like the BoJ’s rate-hike uncertainty, the USD/JPY forecast is far from certain. After all, spring wage negotiations in Japan delivered a third consecutive year of notable pay increases, underlining a positive wage-price dynamic. Major Japanese corporations have committed to lifting wages further, aiming to shield workers from persistent inflation and resolve long-standing labour shortages. These developments bolster Japan’s domestic inflation outlook, which remains near the BoJ’s 2% target. However, the central bank’s prudence in the face of global uncertainty is preventing any rush to tighten policy.
A recent Bloomberg survey of economists revealed that while most anticipate a summer hike, an increasing minority—13% versus 4% previously—are eyeing a potential move as early as May. These expectations could gather pace should Japan’s inflation accelerates further.
All Eyes on the Fed: Dovish Risks Linger
With the BoJ decision in the rear-view mirror, the spotlight now turns to the US Federal Reserve’s policy announcement later today. While traders do not expect an immediate shift in policy, markets are bracing for the possibility of a dovish tilt in the Fed’s updated guidance. Chairman Jerome Powell’s remarks during the press conference will be heavily scrutinized, particularly for any hints that rate cuts might arrive sooner than previously anticipated.
The Federal Funds Rate is expected to remain within the 4.25% to 4.5% range, but Powell’s assessment of inflation risks and economic resilience will be pivotal. The dollar could come under renewed pressure if the Fed acknowledges weakening economic momentum or heightened risks from President Trump’s upcoming tariff actions.
US Dollar Rebounds—But For How Long?
A mild recovery for US dollar index comes after it recently tested a five-month low around the 103.40 support level. The US dollar found some breathing room thanks to upbeat US industrial production data, which jumped 0.7% month-on-month in February—beating expectations of 0.2%. Manufacturing output also impressed, with an 8.5% surge in motor vehicle and parts production helping lift overall activity by 0.9%.
Still, not all is rosy on the US macro front. Recent data has painted a gloomy picture. February’s retail sales grew by just 0.2% month-on-month, far short of the 0.6% forecast, while January’s figure was revised down to -1.2%. The Empire State Manufacturing Index echoed the weakness, plunging to -20.0 versus an expected -1.9. Additionally, softer-than-expected CPI and PPI prints, coupled with weakening consumer sentiment, suggest that downside risks to growth are building.
Technical Analysis: USD/JPY at a Critical Juncture
Source: TradingView.com
From a technical perspective, USD/JPY is flirting with a major resistance zone near the 150.00 mark. This level, which once served as key support, has now become a pivotal barrier. A sustained break above 150.00 would likely shift the momentum back toward the bulls, paving the way for a test of 151.25 and possibly the 200-day moving average near 152.00.
On the downside, if 150.00 holds firm, selling pressure could drag the pair lower, with immediate support seen at 149.20, followed by 148.10. A deeper correction could put last week’s low of 146.50 and the psychological 145.00 level back in focus.
In short, USD/JPY is at a crossroads, with the Federal Reserve’s tone likely to determine whether the pair pushes higher or retreats in the days ahead.
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