The USD/JPY pair is under pressure as the US Dollar weakens against the Japanese Yen. Currently, the pair is trading at about 153.06, close to a two-month low after a significant drop last week. Japan has not announced any direct intervention yet, but officials are worried about currency fluctuations. They are ready to respond to any excessive moves. Meanwhile, traders are watching for the Federal Reserve’s upcoming decision on interest rates, especially Chairman Jerome Powell’s comments, as no changes are expected.

Possible Rate Cuts

If there are hints of rate cuts later this year, it could put more pressure on the US Dollar. On the other hand, if the Fed adopts a cautious or hawkish approach, it might support the USD/JPY in the short term. Technically, the outlook for the pair is bearish, with prices falling below important simple moving averages. Momentum indicators suggest further declines may be ahead. The MACD shows increasing downside momentum, while the RSI indicates weakness, falling into oversold territory. If prices break below 153.00, more losses could follow. However, a rise above 155.00 could ease short-term bearishness. Still, with trading below the 100-day SMA, downward potential remains. The bearish trend that began last year continues. Falling below the 100-day Simple Moving Average signaled a downtrend. With the pair now near 148.50, the market reflects two rate cuts by the Federal Reserve in late 2025, while the Bank of Japan has cautiously tightened its policies.

Market Reactions

It’s important to remember the sharp drops caused by suspected interventions from the Ministry of Finance in 2025 when the pair was above 155. The risk of such actions at current levels has decreased, leading to a lower need for aggressive downside protection. As a result, USD/JPY’s 1-month implied volatility has dropped to around 8.5%, making options pricing more reasonable compared to last year’s peak of over 12%. The Fed’s dovish shift was a key factor, but markets have already adjusted for recent cuts. Last week’s U.S. inflation data came in at 2.5%, indicating the Fed may hold off on further changes. Meanwhile, Japan’s core inflation is just above 2.0%. This narrowing gap in policy could slow the strong downward momentum in the coming weeks. Given the waning momentum, traders might consider selling out-of-the-money call options or using bear call spreads to take advantage of a stable price range. This strategy benefits if USD/JPY remains below a certain level, echoing the belief that the easiest path remains downward, but major price swings may be over. The key psychological support level of 150.00, which was significant in 2025, now acts as a critical resistance point. The Relative Strength Index (RSI) is no longer at the extreme oversold levels we saw in late 2025; it now sits around 40 on the daily chart. While the technical outlook still leans bearish, the absence of extreme levels indicates a potential consolidation phase may be near. A strong break below the recent low of 147.80 is needed to signal a further downward leg. Create your live VT Markets account and start trading now.

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