USD/JPY Declines as Fed Signals September Rate Cut

On Wednesday, the USD/JPY pair declined by 1.5% following the Bank of Japan’s surprise quarter-point rate hike—the second such hike since 2007. Japanese interest rates are now above zero for the first time since September 2010.

Meanwhile, the Federal Reserve (Fed) maintained rates during its July meeting, as expected. Fed Chairman Jerome Powell emphasized that specific US data conditions must be met before the central bank considers implementing rate cuts.

USD/JPY Weighs Rate Cut Expectations

The BoJ’s unexpected rate hike took rates to 0.25%, while the Fed’s July rate call kept rates between 5.25% and 5.5%. Investors have fully priced in a quarter-point rate cut for September 18, with 100% odds.

Despite the BoJ’s move, the Japanese central bank scaled back its asset purchasing program less than anticipated, limiting the impact of the rate increase.

USD/JPY fell to the 150.00 major price level for the first time since March, dropping 1.5% on Wednesday. The pair dipped below the 200-day Exponential Moving Average (EMA) after a steady bullish trend since January. Overall, USD/JPY has retreated 7.6% from its recent multi-decade highs, influenced by suspected “Yenterventions” from the BoJ and the Japanese Ministry of Finance.

Looking ahead, markets will closely monitor developments, and a modest buying pressure could push the USD/JPY pair back above the 200-day EMA at 152.40. A technical support level lies near 147.50 at March’s swing low, with early 2024 bids just above 140.00 waiting below.