USD/JPY Price Forecast - USD to JPY Holds 147.95 as Fed Eases and BoJ Faces Rising Pressure Ahead of October Shift

USD/JPY Stays Volatile Near 148 as Fed Cuts Meet BoJ Dissent

The USD/JPY pair ended the week at 147.95, swinging between a low of 145.48 and a high of 148.28 as traders digested a 25-basis-point Fed rate cut and growing dissent within the Bank of Japan. While the Fed move was fully priced, the dollar initially slipped before rebounding on higher Treasury yields. Meanwhile, the BoJ held rates at 0.5%, but a 7–2 split on the vote signaled a deeper internal rift, raising expectations that a hike could arrive by October.

Japanese Political Uncertainty Adds to Currency Pressure

The Liberal Democratic Party will choose a new leader on October 4, with Shinjiro Koizumi slightly ahead of Sanae Takaichi in recent polls. Koizumi, backed by former PM Suga and seen as market-friendly, holds a 70% probability of winning according to betting markets. His victory could accelerate BoJ normalization and strengthen the yen, while a Takaichi win, tied to fiscal expansion, may trigger short-lived dollar strength before fundamentals reassert downward pressure on USD/JPY.

Upcoming Economic Data to Decide Fed’s Tone

Markets will watch the U.S. Services PMI on September 23 (expected 53), GDP on September 25 (Q2 growth at 3.3%), and the Core PCE Price Index on September 26 (forecast 3% YoY). Higher inflation and stronger services activity could dampen rate cut expectations, supporting the dollar, while weaker data may accelerate dovish pricing and weigh on USD/JPY. Initial jobless claims are also projected to rise to 240k, up from 231k, potentially adding pressure to the greenback if labor softens further.

Technical Outlook for USD/JPY Levels

The pair trades above both the 50-day and 200-day EMAs, confirming a bullish short-term bias. A break above 148.28 opens the door to resistance at 149.35, with the August 1 high of 150.91 as the next ceiling. On the downside, a move below the 200-day EMA exposes support at 145.00, a critical inflection level that could spark broader yen appreciation if BoJ policy tightens alongside Fed easing.

BoJ ETF Unwind Signals Policy Shift

The Bank of Japan’s announcement to begin selling parts of its $250 billion ETF and J-REIT holdings marked a further step toward unwinding ultra-loose monetary policy. Combined with hawkish dissents from Takata and Tamura, this signals rising pressure on Governor Ueda to act. Traders recall how a surprise July 2024 rate hike and bond-purchase cuts drove USD/JPY from 155.21 to 139.57 within six weeks—underscoring the risk of a sharp yen rebound if policy turns hawkish faster than expected.

Market Positioning and Probability Bands

Event risk remains elevated ahead of October 4. Short-term, the market is treating 145.00 as the line in the sand, with Koizumi’s odds implying a potential gap lower if he wins the LDP leadership. Conversely, strength toward 149.50 could be faded as the dollar loses structural support from U.S.–Japan yield spreads. NFP on October 3 adds another layer: consensus points to a modest +70k payrolls, well below August’s weak print, a result that could reinforce dollar softness heading into the Japanese political pivot.

Verdict on USD/JPY: Bearish Tilt with Event-Driven Risks

The USD/JPY outlook balances Fed easing against BoJ normalization, with Japanese political developments amplifying volatility. With spot at 147.95, risk skews toward yen strength as internal BoJ pressure mounts and leadership odds favor a more reformist stance. Technicals show upside capping near 150, while downside momentum could accelerate below 145. Based on the convergence of fundamentals, technicals, and political risk, the pair earns a Sell rating on strength toward 149–150, positioning for a medium-term move back into the 143–145 range if October delivers hawkish BoJ signals.

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