Japanese Yen underperforms as US Dollar bounces back, Fed-BoJ takes centre stage

• Japanese Yen reflects weakness against its peers at the start of the Fed-BoJ policy week.
• Both central banks are expected to leave interest rates unchanged.
• Investors will also focus on US flash Q3 GDP, PCE Inflation and earnings of hyperscalers.

The Japanese Yen (JPY) trades lower against its major currency peers on Monday. In the European trade, the US Dollar (USD) is up 0.35% at around 157.36 against the Japanese currency.

The USD/JPY pair gains as the US Dollar claws back its early losses and turns positive. As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.12% higher to near 101.87.

The Greenback gains as investors turn cautious ahead of the Federal Reserve (Fed) monetary policy announcement on Wednesday. According to the CME FedWatch tool, the Fed is almost certain to leave interest rates steady in the 3.75%-4.00% range, which makes the monetary policy guidance a key catalyst for the US Dollar’s outlook.

This week, investors will also pay attention to the preliminary Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) Price Index, and Q3 earnings reports of Amazon, Alphabet and Microsoft are key notable released this week.

What to expect from BoJ?

Analysts at Brown Brothers Harriman (BBH) note that the BoJ is “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again.” They recall that in September, BoJ Governor Kazuo Ueda “warned that rapid rate hikes could unsettle asset prices,” while also cautioning that “it could take some time to confirm that 2% inflation is entrenched.”

Even so, BBH argues that “firmer underlying inflation leaves scope for a more hawkish Outlook report, lifting BoJ rate expectations in favor of JPY.” Reflecting this shift in sentiment, they highlight that “the swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months.”

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 157.38, retaining a mildly bearish near-term bias as spot remains capped beneath the 20-day exponential moving average (EMA) at 157.71. The pair has slipped back under this short-term trend indicator, suggesting topside pressure is fading, while the Relative Strength Index (RSI) at 46.96 drifts below the midline, hinting at a loss of bullish momentum rather than outright oversold conditions.

On the topside, immediate resistance is located at the 20-day EMA at 157.71, and a sustained break above this barrier would be needed to ease the current capped tone and reopen the path toward higher levels. On the downside, the absence of nearby technical supports in the dataset leaves the pair vulnerable to further slippage, with traders likely to watch for emerging horizontal floors or fresh moving average levels to gauge whether the corrective phase extends.

(The technical analysis of this story was written with the help of an AI tool. Know more.)