Fed-BoJ in focus as Japanese Yen lags amid US Dollar rebound

• Fed-BoJ policy week opens with the Japanese Yen under pressure against its peers.
• Unchanged interest rates are expected from both central banks.
• US flash Q3 GDP, PCE inflation and hyperscaler earnings are also on investors’ radar.

The US Dollar (USD) is up 0.35% against the Japanese Yen (JPY). The pair trades around 157.36 during Monday’s European session, with the Yen also losing ground against its other major currency peers.

A recovery in the US Dollar from earlier losses into positive territory is lifting USD/JPY. At the time of writing, the US Dollar Index (DXY) stands near 101.87, up 0.12%. 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 rates are almost certain to remain within the 3.75%-4.00% range. That puts policy guidance at the centre of the US Dollar outlook.

Also on this week’s agenda are the preliminary Q3 Gross Domestic Product (GDP) reading and the Personal Consumption Expenditure (PCE) Price Index. Investors will also scrutinise Q3 earnings releases from Amazon, Alphabet and Microsoft.

BoJ Policy Outlook

For the BoJ, Brown Brothers Harriman (BBH) analysts say it is “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again.” They point back to September, when 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.”

Despite those cautions, BBH maintains 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 note 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 Outlook

At 157.38 on the daily chart, USD/JPY maintains a slightly bearish short-term bias. Spot has fallen back below the 20-day exponential moving average (EMA) at 157.71 and remains capped by it, signalling that upward pressure is weakening. Meanwhile, the Relative Strength Index (RSI) is drifting below its midpoint at 46.96. This points to fading bullish momentum, rather than outright oversold conditions.

The 20-day EMA at 157.71 provides the first resistance level. Only a sustained move above it would relieve the current upside constraint and clear the way for higher levels. With no nearby technical support identified in the dataset, further declines remain a risk. Traders are likely to monitor any emerging horizontal support or new moving-average levels to assess whether the correction continues.

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