With the Federal Reserve's interest rate decision imminent, the USD/JPY pair is retesting its previous high.
2025-10-29 14:00:50
The yen (JPY) retreated from a one-week high in Asian trading on Wednesday, but the decline was limited. Market analysts believe that the Bank of Japan may pause its tightening policy to align with the fiscal expansion plan proposed by new Prime Minister Sanae Takaichi, a policy stance that temporarily weakens the yen's safe-haven appeal.
Meanwhile, trade optimism between the US and Asian countries also dampened buying of safe-haven assets, including the Japanese yen. From the dollar's perspective, the Federal Reserve's (Fed) positioning adjustments ahead of its policy meeting pushed the dollar slightly higher, bringing the USD/JPY pair back above 152.
However, the market widely expects the Federal Reserve to announce a 25-basis-point rate cut at the end of the meeting, and may hint at another rate cut later this year, which will limit the dollar's upward momentum.
Japanese Economic Revitalization Minister Minoru Kiuchi 's remarks on Tuesday sparked market speculation that the Japanese government might intervene in the foreign exchange market to prevent the yen from depreciating excessively. He emphasized that exchange rates should reflect economic fundamentals and avoid sharp short-term fluctuations.
U.S. Treasury Secretary Scott Bessent stated that the U.S. hopes Japan will give its central bank sufficient policy space to stabilize inflation expectations, which is seen as a mild form of pressure from the U.S. on Japanese policy.
In addition, US President Trump and Japanese Prime Minister Sanae Takaichi signed a cooperation agreement on the supply of rare earth and critical minerals, which boosted the yen's performance against major currencies in the short term.
From a policy perspective, the market believes the Bank of Japan may raise interest rates in December or early next year, creating a policy divergence with the Federal Reserve. However, Sanae Takashi's fiscal stimulus plan may delay this process, leading to a divergence in the yen's exchange rate.
From the daily chart, USD/JPY has formed a double top pattern in the 153.30 area, indicating short-term downward pressure. If the exchange rate breaks below the 151.10-151.00 support zone, it will open up further downside potential, targeting the 150 psychological level.
Conversely, if it breaks through the 152.90-153.00 range and holds above 153.30, it may trigger a new round of upward movement, targeting the 154.75 to 155.00 area.
Editor's Note:
The current USD/JPY exchange rate is primarily constrained by two factors: the interplay between expectations of a US interest rate cut and Japan's fiscal expansion policy. In the short term, the yen is likely to fluctuate between 150 and 153. If the Bank of Japan signals a stronger rate hike by the end of the year, while the Federal Reserve continues its easing policy, the yen is expected to regain its upward momentum before the end of the year.
Meanwhile, trade optimism between the US and Asian countries also dampened buying of safe-haven assets, including the Japanese yen. From the dollar's perspective, the Federal Reserve's (Fed) positioning adjustments ahead of its policy meeting pushed the dollar slightly higher, bringing the USD/JPY pair back above 152.
However, the market widely expects the Federal Reserve to announce a 25-basis-point rate cut at the end of the meeting, and may hint at another rate cut later this year, which will limit the dollar's upward momentum.
Japanese Economic Revitalization Minister Minoru Kiuchi 's remarks on Tuesday sparked market speculation that the Japanese government might intervene in the foreign exchange market to prevent the yen from depreciating excessively. He emphasized that exchange rates should reflect economic fundamentals and avoid sharp short-term fluctuations.
U.S. Treasury Secretary Scott Bessent stated that the U.S. hopes Japan will give its central bank sufficient policy space to stabilize inflation expectations, which is seen as a mild form of pressure from the U.S. on Japanese policy.
In addition, US President Trump and Japanese Prime Minister Sanae Takaichi signed a cooperation agreement on the supply of rare earth and critical minerals, which boosted the yen's performance against major currencies in the short term.
From a policy perspective, the market believes the Bank of Japan may raise interest rates in December or early next year, creating a policy divergence with the Federal Reserve. However, Sanae Takashi's fiscal stimulus plan may delay this process, leading to a divergence in the yen's exchange rate.
From the daily chart, USD/JPY has formed a double top pattern in the 153.30 area, indicating short-term downward pressure. If the exchange rate breaks below the 151.10-151.00 support zone, it will open up further downside potential, targeting the 150 psychological level.
Conversely, if it breaks through the 152.90-153.00 range and holds above 153.30, it may trigger a new round of upward movement, targeting the 154.75 to 155.00 area.
Editor's Note:
The current USD/JPY exchange rate is primarily constrained by two factors: the interplay between expectations of a US interest rate cut and Japan's fiscal expansion policy. In the short term, the yen is likely to fluctuate between 150 and 153. If the Bank of Japan signals a stronger rate hike by the end of the year, while the Federal Reserve continues its easing policy, the yen is expected to regain its upward momentum before the end of the year.
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