Japanese Yen lags as US Dollar rebounds, with Fed-BoJ in focus

• With Fed and BoJ policy decisions due this week, the Japanese Yen opens lower against its peers.
• Unchanged interest rates are the expected outcome at both central banks.
• US flash Q3 GDP, PCE inflation and hyperscaler earnings will also draw investors’ attention.

A 0.35% rise takes the US Dollar (USD) to around 157.36 against the Japanese Yen (JPY) during Monday’s European session. The yen is also weaker against its other major currency peers.

Having recovered its initial losses, the US Dollar moves into positive territory, lifting USD/JPY. At the time of writing, a 0.12% gain puts the US Dollar Index (DXY) near 101.87. The index measures the greenback against six major currencies.

Caution ahead of Wednesday’s Federal Reserve (Fed) monetary policy announcement is supporting the greenback. The CME FedWatch tool indicates that interest rates are almost certain to remain within the 3.75%-4.00% range. As a result, the Fed’s policy guidance will be a key driver of the US Dollar’s outlook.

Also on investors’ agenda this week are preliminary Q3 Gross Domestic Product (GDP) data and the Personal Consumption Expenditure (PCE) Price Index. Among the other notable releases are Q3 earnings reports from Amazon, Alphabet and Microsoft.

BoJ expected to hold rates steady

For Brown Brothers Harriman (BBH) analysts, the BoJ is “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again.” Looking back to September, they point out that BoJ Governor Kazuo Ueda “warned that rapid rate hikes could unsettle asset prices,” and cautioned that “it could take some time to confirm that 2% inflation is entrenched.”

Nevertheless, BBH’s view is that “firmer underlying inflation leaves scope for a more hawkish Outlook report, lifting BoJ rate expectations in favor of JPY.” As evidence of the change in sentiment, the analysts point to market pricing, noting 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 Remains Capped Below Its 20-Day EMA

Trading at 157.38 on the daily chart, USD/JPY maintains a slightly bearish near-term bias below the 20-day exponential moving average (EMA) of 157.71. A retreat beneath this short-term trend gauge points to waning upward pressure. Meanwhile, the Relative Strength Index (RSI) is drifting below its midpoint at 46.96, signalling weaker bullish momentum rather than outright oversold conditions.

The 20-day EMA at 157.71 presents the first upside hurdle. Only a sustained move above it would relieve the current constraint on the pair and clear the way for higher levels. With no nearby technical support identified in the dataset, further declines remain a risk. Traders are therefore likely to look for emerging horizontal support or new moving average levels to assess whether the correction has further to run.

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