USD/JPY Price Slides to 146.20 as Fed Cut and BoJ Divergence Drive Yen Strength

USD/JPY Slides to 146.20 as Traders Position Ahead of Fed and BoJ

USD/JPY fell toward 146.20, marking a drop of nearly 3% from its July high of 150.96, as markets brace for back-to-back central bank decisions. The Federal Reserve is expected to cut rates by 25 bps to 4.00%–4.25%, with futures pricing in as much as 50 bps more easing before year-end, while the Bank of Japan debates further tightening. The pair’s move below its 50-day EMA and the lowest daily close since late July underscore rising bearish momentum.

Fed Rate Cuts Narrow the U.S.–Japan Yield Spread

The U.S. 10-year Treasury yield slid to 4.02%, while the 5-year fell to 3.65%, pushing capital away from the dollar. A 25 bps cut on Wednesday is almost fully priced in, with the CME FedWatch tool showing a 96% probability, but a surprise 50 bps cut would accelerate downside for USD/JPY toward 145.00 or even 144.00. U.S. labor data has reinforced the case for easing: Nonfarm Payrolls revisions erased 919,000 jobs from the past year, while August payrolls showed only 22,000 additions and unemployment climbing to 4.3%. Trump’s tariffs have further weakened hiring momentum, amplifying dollar vulnerability.

Japan’s Trade and Inflation Data Fuel BoJ Hawkish Bets

Japanese exports fell 0.1% in August, extending weakness after July’s -2.6%, with shipments to the U.S. down 13.8% and exports to China lower by 0.5%. Imports contracted 5.2%, reflecting sluggish domestic demand. Despite the trade softness, Japan’s inflation remains at 3.1%, well above the BoJ’s 2% target. With core prices sticky, traders increasingly expect a 0.25% hike later this year, which would lift short-term rates from 0.50% to 0.75%. Such a shift would mark the first policy divergence in decades favoring the yen against a dovish Fed.

Technical Signals Point to 145–144 as Key Downside Targets

The rejection of USD/JPY near 147.90, aligned with a Fair Value Gap, triggered renewed selling. The pair is now oscillating between 146.57 and 146.21, just above August’s lows. Momentum indicators confirm the bearish tilt: the RSI continues to fall, and cumulative volume delta shows strong seller dominance since the reversal from 147.50. Breaking below 146.20 would expose 145.50 support, with a deeper slide toward 144.00 if U.S. yields retreat further. Bulls need a reclaim of 147.20 to neutralize the bias and open a rebound toward 148.50–149.35.

Global Market Context Adds Pressure on USD/JPY

The U.S. Dollar Index has already dropped 0.7% to a two-month low near 96.60, weighed by Fed expectations and a surge in equities. The S&P 500 and Nasdaq 100 both touched record highs, while gold extended its rally, reflecting a broader rotation away from the greenback. Against this backdrop, the yen has gained appeal as both a rate-differential and safe-haven play. EUR/JPY trades near 174.00, within reach of its 2024 high, while AUD/JPY cooled after an 11-year streak of gains, showing that yen flows are reshaping across multiple crosses.

USD/JPY Forecast Verdict

At 146.20, USD/JPY is positioned at a decisive pivot. A dovish Fed with guidance for multiple cuts could break the pair lower toward 145.00–144.00, especially if the BoJ confirms further hikes. Conversely, if Powell signals caution and the BoJ stays on hold, a rebound back to 148.50–149.35 is feasible. With U.S. labor weakness, falling yields, and persistent Japanese inflation, the balance of risks tilts bearish. Based on the current data, USD/JPY is a Sell below 147.00, with short-term targets at 145.50 and 144.00.

That's TradingNEWS