Japanese Yen recedes as Fed and BoJ decisions loom

• The USD/JPY pair recovers as the US Dollar firms on near-certain Fed hike bets.
• The rebound comes off a roughly seven-month low around 153.00 struck last week.
• Both of this week's central bank meetings lean hawkish.

USD/JPY is trading higher on Monday near 154.40, after touching an intraday high just shy of 155.00.

Markets are now heavily positioned for a Federal Reserve (Fed) rate hike on Wednesday, with the odds up near 90% after hot August inflation data. That repricing has pushed United States (US) Treasury yields higher with the 10-year reaching its highest yield in three years on Monday.

A wider US-Japan yield gap pulls flows back toward the US Dollar. Higher Oil prices add to the picture, lifting US inflation expectations and yields while worsening Japan's trade balance.

On the Japanese side, the Bank of Japan (BoJ) meets Friday, and a 25-basis-point hike is fully priced in. Because so much of that is already priced in, the Yen drew no fresh buying today, which let the US Dollar run. But it also puts a floor under the Yen and caps how far the pair can climb.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 154.38, holding a modest bullish bias as it stays above the 20-period Simple Moving Average (SMA) at 154.04 and the nearby horizontal floor at 153.99. However, the advance is capped in the short term by initial resistance at 154.42, with further barriers stacked at 154.58 and 155.00, while the longer-term 100-period SMA at 157.12 remains a distant ceiling. The Relative Strength Index (RSI) around 51 suggests neutral momentum, hinting at consolidation before a clearer directional break.

On the topside, a sustained move above 154.42 would open the way toward 154.58, ahead of the 155.00 psychological level, where selling interest could re-emerge before the broader resistance defined by the 100-period SMA at 157.12. On the downside, immediate support is seen at the 20-period SMA at 154.04, followed by the horizontal level at 153.99; a drop below this cluster would weaken the bullish tone and expose deeper corrective risk on the pair.

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