USD/JPY Price Forecast - Dollar to Yen at 148.40 as Fed Cuts Clash With BoJ Hawkish Signals, CPI in Focus

USD/JPY Tests 148.50 as Fed Cuts Collide With BoJ Hawkish Hints

USD/JPY is trading near 148.40, marking a sharp rebound of almost 2% from last week’s FOMC lows at 145.49. The Federal Reserve’s renewed easing cycle has fueled volatility, but the Bank of Japan’s cautious hawkish tone is holding the yen in check. This divergence between a Fed easing into elevated inflation and a BoJ edging toward possible rate hikes is defining the current range. The pair has now spent seven consecutive weeks between 145.50 and 148.80, with traders positioning for a decisive breakout as September’s U.S. Core CPI release approaches.

Technical Compression Signals Larger Move in USD/JPY

Charts show a classic coiling structure. Support remains firm at 145.83, the 61.8% retracement of July’s advance. Resistance is stacked at 148.55–148.84, capped by the 200-day moving average and prior cycle highs. A close above 148.84 would expose 149.75 and eventually 150.88, the 100% extension of April’s advance. A downside break below 145.83 would confirm a larger reversal, targeting 144.10–144.40. For now, the higher lows since April keep buyers marginally favored, but momentum indicators like the RSI hovering near neutral reflect hesitation ahead of key data.

U.S. Inflation and Treasury Yields Drive Dollar Demand

The U.S. Core CPI and PCE inflation data this week are critical for direction. Last year’s Fed cuts failed to bring yields down; instead, 10-year Treasuries rose as inflation stayed above target, making long bonds unattractive. The same pattern is re-emerging. Yields are climbing despite cuts, keeping the U.S. dollar resilient and preventing USD/JPY from breaking lower. The 10-year yield at 4.36% continues to support the dollar against lower-yielding currencies like the yen. Traders will be watching whether inflation eases enough to justify further cuts or forces the Fed to slow its easing pace.

BoJ Policy and Yen Positioning Under Scrutiny

The BoJ’s last meeting offered no fresh policy action but Governor Ueda signaled that rate hikes remain on the table if wage growth and inflation stabilize. This contrasts with the Fed’s dovish pivot, reinforcing policy divergence. Japanese investors have also been unwinding carry trades selectively, but the yen remains one of the weakest majors this year. USD/JPY’s failure to drop despite repeated retests of support reflects heavy Japanese demand for overseas assets, especially U.S. Treasuries. The 145.00 level is increasingly seen as the line where authorities might intervene verbally if yen weakness accelerates.

Global Risk Sentiment Adds Volatility to USD/JPY

Broader risk trends are feeding into USD/JPY flows. U.S. equities remain near record highs despite Fed cuts, and this risk-on backdrop reduces demand for the yen as a safe haven. However, if equity volatility spikes or if geopolitical risk in Asia escalates, demand for the yen could surge quickly. Hedge funds remain net long the dollar versus yen, but positioning is stretched, raising the odds of sharp corrections if macro surprises hit. The pair’s resilience above 147 in recent weeks shows how deeply markets are anchored to U.S. yield spreads rather than Japanese fundamentals.

Verdict — USD/JPY Is a Hold, Rangebound but Vulnerable to Breakout

With USD/JPY at 148.40, the pair sits just below multi-week resistance at 148.84, a level that has capped rallies since July. Support is established at 145.83, and below that the path opens toward 144.10. The divergence between Fed easing and BoJ hawkish hints suggests longer-term bearish pressure for USD/JPY, yet yields and liquidity flows keep the dollar supported in the short term. The trade remains Hold, with upside capped unless 148.84 is breached, and downside risks emerging if inflation surprises cool U.S. yields and allow yen strength to return.

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