The Fed's 25 basis point rate cut was less dovish than market expectations, and the US dollar index rose for three consecutive trading days. The market had previously expected the Fed to take a large rate cut, which is common in crises, and had established positions in advance, but Powell's opposition to a 50 basis point rate cut caught them off guard.



The Bank of Japan is widely expected to keep interest rates unchanged at 0.5% on Friday (September 19), while offering a cautiously optimistic economic outlook. The market will closely monitor any hint of an October rate hike.

A former Bank of Japan official believes an October rate hike is highly likely even if ultra-dovish Yeono Takano wins the election. Strong corporate profits and steady wage increases are seen as sufficient reason for the Bank of Japan to act in the fourth quarter.

However, with no “sources” tipping off the media ahead of the meeting, it now seems unlikely that the BoJ will signal action, which could see the Yen weaken further in line with recent momentum – a scenario that will continue to support USD/JPY and EUR/JPY bulls.

USD/JPY and EUR/JPY technical outlook ahead of BoJ decision

USD/JPY technical analysis

The dollar's rebound, coupled with subdued expectations for a Bank of Japan rate hike, has prevented USD/JPY from breaking below its range in recent days. Wednesday's lower shadow revealed a false breakout, with the pair experiencing a sharp reversal near the July 20 low of 145.76.

USD/JPY's momentum indicators are clearly pointing to an upward trend within the range, with the daily close above the 200-day exponential moving average (EMA, 147.90). A clear directional uptrend is visible on the one-hour chart.



(USD/JPY one-hour chart, source: Yihuitong)

The exchange rate is expected to test the upper limit of the range and may retest the 200-day exponential moving average (147.90). Bulls can watch for a pullback to the monthly pivot point (147.50) and target the monthly S1 pivot point near the 200-day simple moving average (SMA, 148.59).



(USD/JPY daily chart, source: Yihuitong)

EUR/JPY Technical Analysis

EUR/JPY has broken out strongly and has now risen to its highest level since July 2025 at 174.44. This bullish breakout opens the way for a retest of the 2025 high.

In the event of a pullback on the daily time frame, key support levels include the monthly S1 pivot point at 173.30, the 20-day exponential moving average at 173.03, and the rising trend line formed from the August low. Based on the current momentum, a retest or even a breakout above the 2025 high remains a possible target for EUR bulls.

Near-term resistance lies at the monthly R2 pivot point at 174.75, which could temporarily curb upward momentum and trigger a technical pullback.



(Euro/yen daily chart, source: Yihuitong)

At 9:16 Beijing time, the US dollar was trading at 148.05/06 against the Japanese yen.