USD/JPY continued to fall as the market focused on the US-Japan policy divergence and the FOMC decision.
2025-09-17 13:36:28
USD/JPY rebounded slightly in Asian trading on Wednesday, but remained below the 147.00 mark, with the yen showing caution overall. Against the backdrop of significant divergence in US and Japanese policy paths, the yen's pressure was limited.
The market generally believes that the Bank of Japan will stick to its loose policy, while the Federal Reserve is expected to cut interest rates by 25 basis points on the same day to narrow the interest rate gap between the United States and Japan, thereby providing some support to the low-yield yen.
In Japan, August trade data showed that the trade deficit widened from 118.4 billion yen to 242.5 billion yen, but still below the market expectation of 513.6 billion yen. Exports fell by only 0.1%, better than the expected 1.9% decline.
Imports fell 5.2%, indicating continued weakness in domestic demand. The resignation of Japanese Prime Minister Shigeru Ishiba has increased policy uncertainty, providing reason for the Bank of Japan to be cautious in raising interest rates. The market generally expects the Bank of Japan to maintain its benchmark interest rate at 0.5%, but may gradually increase it before the end of the year.
In the US, the Federal Reserve is expected to resume its interest rate-cutting cycle, with a potential 25 basis point cut at this meeting. Market expectations for two remaining rate cuts this year are rising, which is the primary reason for the recent decline in the US dollar and the USD/JPY pair's drop to the 146.20 support level.
Geopolitical risks also affected market sentiment: Russia launched a large-scale attack on the city of Zaporizhia in southern Ukraine, and US President Trump urged Ukrainian President Zelensky to reach a deal as soon as possible and Europe to immediately stop buying Russian oil.
At the same time, Israel launched a ground offensive on Gaza City, and the situation in the Middle East was tense. These factors supported the demand for the Japanese yen as a safe-haven asset.
On the daily chart, key support levels are 146.20 (100-day SMA) and 146.00. A break below this could lead to further declines to 145.35 and the psychological level of 145.00. Upward resistance is 146.70, a short-term resistance, and the 147.00 round number is a key psychological level. A break above 147.15-147.20 could see a move to 147.55 or even 148.00.
A sustained break above 148.00 could challenge the 200-day moving average (around 148.75) and the 149.00 high. A break above the monthly high of 149.15 would favor a short-term bullish bias. Daily oscillators are again bearish, suggesting continued downward pressure, but a rebound from the 146.20 support level warrants careful follow-up.
Overall, USD/JPY is still mainly volatile and weak in the short term, and we need to pay attention to the policy signals of FOMC and BoJ, as well as the effectiveness of technical support.
Editor's opinion:
The yen is constrained in the short term by two major factors: the Bank of Japan's unchanged interest rate, coupled with weak domestic demand and political uncertainty, limit the yen's sharp decline; expectations of a Fed rate cut support the dollar's rebound, but the upward momentum of USD/JPY is limited, mainly constrained by the support level of 146.20.
Pay close attention to the immediate impact of US-Japan policy meetings and geopolitical risks on the market.
The market generally believes that the Bank of Japan will stick to its loose policy, while the Federal Reserve is expected to cut interest rates by 25 basis points on the same day to narrow the interest rate gap between the United States and Japan, thereby providing some support to the low-yield yen.
In Japan, August trade data showed that the trade deficit widened from 118.4 billion yen to 242.5 billion yen, but still below the market expectation of 513.6 billion yen. Exports fell by only 0.1%, better than the expected 1.9% decline.
Imports fell 5.2%, indicating continued weakness in domestic demand. The resignation of Japanese Prime Minister Shigeru Ishiba has increased policy uncertainty, providing reason for the Bank of Japan to be cautious in raising interest rates. The market generally expects the Bank of Japan to maintain its benchmark interest rate at 0.5%, but may gradually increase it before the end of the year.
In the US, the Federal Reserve is expected to resume its interest rate-cutting cycle, with a potential 25 basis point cut at this meeting. Market expectations for two remaining rate cuts this year are rising, which is the primary reason for the recent decline in the US dollar and the USD/JPY pair's drop to the 146.20 support level.
Geopolitical risks also affected market sentiment: Russia launched a large-scale attack on the city of Zaporizhia in southern Ukraine, and US President Trump urged Ukrainian President Zelensky to reach a deal as soon as possible and Europe to immediately stop buying Russian oil.
At the same time, Israel launched a ground offensive on Gaza City, and the situation in the Middle East was tense. These factors supported the demand for the Japanese yen as a safe-haven asset.
On the daily chart, key support levels are 146.20 (100-day SMA) and 146.00. A break below this could lead to further declines to 145.35 and the psychological level of 145.00. Upward resistance is 146.70, a short-term resistance, and the 147.00 round number is a key psychological level. A break above 147.15-147.20 could see a move to 147.55 or even 148.00.
A sustained break above 148.00 could challenge the 200-day moving average (around 148.75) and the 149.00 high. A break above the monthly high of 149.15 would favor a short-term bullish bias. Daily oscillators are again bearish, suggesting continued downward pressure, but a rebound from the 146.20 support level warrants careful follow-up.
Overall, USD/JPY is still mainly volatile and weak in the short term, and we need to pay attention to the policy signals of FOMC and BoJ, as well as the effectiveness of technical support.
Editor's opinion:
The yen is constrained in the short term by two major factors: the Bank of Japan's unchanged interest rate, coupled with weak domestic demand and political uncertainty, limit the yen's sharp decline; expectations of a Fed rate cut support the dollar's rebound, but the upward momentum of USD/JPY is limited, mainly constrained by the support level of 146.20.
Pay close attention to the immediate impact of US-Japan policy meetings and geopolitical risks on the market.
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