USD/JPY Price Forecast: 157.50 pivotal support holds after Warsh's remarks
- USD/JPY struggles to capitalize on a modest Asian session uptick as USD bulls remain on the back foot.
- Fed Chair Warsh’s remarks do little to alter rate expectations or provide a fresh impetus to the USD.
- The technical setup warrants some caution for bearish traders before positioning for deeper losses.
The USD/JPY pair fades an Asian session uptick to the 158.15-158.20 region, sliding back below the 158.00 mark following Federal Reserve (Fed) Chair Kevin Warsh's opening remarks at the Annual Meetings of the International Monetary Fund and World Bank Group, in Bangkok.
In a conversation with the International Monetary Fund (IMF) Managing Director Kristalina Georgieva, Warsh said that the world has broadly conformed to our expectations since the September FOMC meeting. Warsh added that the Fed has made clear that it would deliver price stability and that he doesn't believe in prejudging meetings. This, along with a further decline in US bond yields, keeps the US Dollar (USD) depressed and exerts some downward pressure on the USD/JPY pair.
Meanwhile, traders remain on high alert amid fears that authorities will step in again to prop up the Japanese Yen (JPY), which contributes to capping the currency pair. However, the growing acceptance that the US central bank will raise borrowing costs again at its December policy meeting, along with persistent geopolitical uncertainties stemming from escalating conflicts in the Middle East, could act as a tailwind for the safe-haven Greenback. This could help limit losses for the USD/JPY pair.
From a technical perspective, the recent repeated failure near the 159.00 mark warrants caution for bullish traders. Adding to this, the Relative Strength Index (14) at 45.03 sits just below the midline and hints at neutral-to-slightly bearish momentum. Furthermore, the Moving Average Convergence Divergence (MACD) (12, 26, close, 9) remains marginally negative, suggesting that upside attempts could stay hesitant until momentum improves or the USD/JPY pair decisively breaks through 159.00.
Spot prices, however, have been finding decent support near the 157.50 horizontal zone, making it prudent to wait for sustained weakness below the said area before positioning for any further losses. The USD/JPY pair might then turn vulnerable to weaken further below the 157.00 round figure and aim towards testing the 156.50-156.45 horizontal support. Nevertheless, traders are more likely to wait for a momentum break in either direction to re-establish a stronger near-term trend for the currency pair.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
USD/JPY 4-hour chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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