"Central Bank Week" kicks off, with USD/JPY bulls and bears arguing over their views
2025-09-15 15:50:22
During the European session on Monday (September 15th), the USD/JPY pair continued to consolidate within a horizontal channel that has formed over a month, fluctuating around the 147 mark, continuing its sideways trend with its direction uncertain. Market attention will be focused on two key meetings this week: the Federal Reserve meeting on Wednesday and the Bank of Japan's policy update on Friday. The combination of policy divergence and political uncertainty will make the exchange rate's next move a typical event-driven one.
Recent political developments in Japan have heightened uncertainty. Prime Minister Shigeru Ishiba's resignation earlier this month cast a shadow over policy continuity and the path of fiscal reform. Markets are speculating that the Bank of Japan may hesitate on the pace of interest rate hikes, dampening yen bullish sentiment in the short term. Meanwhile, the latest US-Japan trade agreement has alleviated some sources of uncertainty. Furthermore, upward revisions to Japan's second-quarter GDP, a tight labor market, and positive real wages after seven months provide fundamental support for another interest rate hike this year, providing medium-term support for the yen.
On a cross-border level, if the Bank of Japan adheres to its policy normalization path and the Federal Reserve implements a rate cut and releases stronger easing guidance this week, the divergence between the two policies will widen the convergence of yield spreads, theoretically favoring the valuation recovery of the lower-yielding yen. Conversely, if the Bank of Japan takes a dovish turn or delays its rate hikes, while the Fed's easing falls short of expectations, short positions in the US dollar may be forced to cover, increasing the risk of a temporary rebound in the US dollar.
As the market prices in the Federal Reserve's interest rate cut this week, the US dollar index has come under pressure. The weaker dollar, coupled with expectations of the Bank of Japan's "wait-and-see" approach to normalization, has led to a slight consensus on a downward path for USD/JPY. However, due to pre-event position management constraints, the market is more inclined to wait and see rather than pursue the market.
On the daily chart, the middle Bollinger Band is at 147.575, with the upper and lower Bollinger Bands at 148.444 and 146.706, respectively. The price is currently trading in a narrow range around 147.40. The candlestick bodies are short and the shadows are frequent, indicating a typical sideways trend and the concomitant Bollinger Band squeeze, signaling the impending directional breakout following a contraction in volatility. Focus on the high trading volume between the middle and upper Bollinger Bands. A break above 148.444 and a subsequent retracement confirm the trend, with the potential for a move towards the previous high of 149.134 and further towards the current peak of 150.914. A break below 146.706 would increase the probability of a test of the static support bands of 146.211 and 146.303. If this band is breached by volume, a pullback to 144.177 is possible.
In terms of momentum, the MACD DIFF is 0.016, the DEA is 0.055, and the MACD histogram is -0.078, indicating that the DIFF is still below the signal line, and the trend momentum is weak but stuck near the zero axis. The recent bar length has shown a convergence trend, reflecting the weakening of short-term momentum and the possible rebalancing of the trend. The RSI (14) is near 49.453, in the neutral zone, and has not yet given a clear overbought/oversold signal, which is consistent with the "box + waiting for catalyst" pattern on the market. Overall, the Bollinger middle band near 147.575 is a short-term indicator. Its gains and losses will determine whether the exchange rate continues to fluctuate in a mean-reversion manner or enters a trend trading phase.
Short-term (event-driven, 1–2 weeks):
Bearish scenario: If the FOMC implements a rate cut and releases a stronger easing signal, and the Bank of Japan maintains a "gradual normalization" communication framework, the exchange rate may decline to test 146.706. After effectively breaking through, it will look to the support zone of 146.211/146.303; if the volume cooperates and there is a retracement without breaking, a downward channel extending further to 144.177 will be opened.
Bullish scenario: If the Fed eases less than market expectations or releases more neutral guidance, and the Bank of Japan turns cautious amid political uncertainty, the exchange rate may break through 148.444. Focus on 149.134 and 150.914 on the upside, but there is dense resistance near the previous high, so be wary of high-rise declines and false breakthroughs.
Fundamentals
Recent political developments in Japan have heightened uncertainty. Prime Minister Shigeru Ishiba's resignation earlier this month cast a shadow over policy continuity and the path of fiscal reform. Markets are speculating that the Bank of Japan may hesitate on the pace of interest rate hikes, dampening yen bullish sentiment in the short term. Meanwhile, the latest US-Japan trade agreement has alleviated some sources of uncertainty. Furthermore, upward revisions to Japan's second-quarter GDP, a tight labor market, and positive real wages after seven months provide fundamental support for another interest rate hike this year, providing medium-term support for the yen.
On a cross-border level, if the Bank of Japan adheres to its policy normalization path and the Federal Reserve implements a rate cut and releases stronger easing guidance this week, the divergence between the two policies will widen the convergence of yield spreads, theoretically favoring the valuation recovery of the lower-yielding yen. Conversely, if the Bank of Japan takes a dovish turn or delays its rate hikes, while the Fed's easing falls short of expectations, short positions in the US dollar may be forced to cover, increasing the risk of a temporary rebound in the US dollar.
As the market prices in the Federal Reserve's interest rate cut this week, the US dollar index has come under pressure. The weaker dollar, coupled with expectations of the Bank of Japan's "wait-and-see" approach to normalization, has led to a slight consensus on a downward path for USD/JPY. However, due to pre-event position management constraints, the market is more inclined to wait and see rather than pursue the market.
Technical aspects:
On the daily chart, the middle Bollinger Band is at 147.575, with the upper and lower Bollinger Bands at 148.444 and 146.706, respectively. The price is currently trading in a narrow range around 147.40. The candlestick bodies are short and the shadows are frequent, indicating a typical sideways trend and the concomitant Bollinger Band squeeze, signaling the impending directional breakout following a contraction in volatility. Focus on the high trading volume between the middle and upper Bollinger Bands. A break above 148.444 and a subsequent retracement confirm the trend, with the potential for a move towards the previous high of 149.134 and further towards the current peak of 150.914. A break below 146.706 would increase the probability of a test of the static support bands of 146.211 and 146.303. If this band is breached by volume, a pullback to 144.177 is possible.
In terms of momentum, the MACD DIFF is 0.016, the DEA is 0.055, and the MACD histogram is -0.078, indicating that the DIFF is still below the signal line, and the trend momentum is weak but stuck near the zero axis. The recent bar length has shown a convergence trend, reflecting the weakening of short-term momentum and the possible rebalancing of the trend. The RSI (14) is near 49.453, in the neutral zone, and has not yet given a clear overbought/oversold signal, which is consistent with the "box + waiting for catalyst" pattern on the market. Overall, the Bollinger middle band near 147.575 is a short-term indicator. Its gains and losses will determine whether the exchange rate continues to fluctuate in a mean-reversion manner or enters a trend trading phase.
Market Outlook
Short-term (event-driven, 1–2 weeks):
Bearish scenario: If the FOMC implements a rate cut and releases a stronger easing signal, and the Bank of Japan maintains a "gradual normalization" communication framework, the exchange rate may decline to test 146.706. After effectively breaking through, it will look to the support zone of 146.211/146.303; if the volume cooperates and there is a retracement without breaking, a downward channel extending further to 144.177 will be opened.
Bullish scenario: If the Fed eases less than market expectations or releases more neutral guidance, and the Bank of Japan turns cautious amid political uncertainty, the exchange rate may break through 148.444. Focus on 149.134 and 150.914 on the upside, but there is dense resistance near the previous high, so be wary of high-rise declines and false breakthroughs.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
