USD/JPY PRice Forecast - USD to JPY at 147.73 as Fed Cut and BoJ Hawkish Split Define 145.90–149.00 Battleground

USD/JPY Under Pressure After Fed Cut and BoJ’s Hawkish Signals

The USD/JPY pair is trading around 147.73 after briefly hitting a two-week high of 148.38 earlier in the session. Dollar momentum faded as the U.S. Dollar Index slipped to 97.38, snapping a three-day rally. The move came after last week’s 25-bps Fed cut, where Chair Jerome Powell signaled further easing would be gradual and data-dependent. Fed Governor Stephen Miran warned policy was “well into restrictive territory,” calling for 50-bps cuts, highlighting internal division.

Bank of Japan’s Policy Tension and Political Shifts

The Bank of Japan held its policy rate at 0.50% but signaled the start of normalization, outlining a gradual unwind of ETF and J-REIT holdings. Governor Ueda noted that underlying inflation is edging toward 2%, while tariffs and food inflation risk pushing it higher. Two board members — Hajime Takata and Naoki Tamura — dissented, demanding an immediate hike to 0.75%. This split indicates pressure for further tightening as durable wage growth becomes a policy condition. With Japan set to choose a new prime minister on October 4, political leadership will influence the BoJ’s trajectory.

U.S. Yields Keep Driving USD/JPY Correlation

Correlations remain strong between USD/JPY and U.S. yields, with coefficients of -0.75 for Fed rate cut pricing, 0.51 for 2-year yields, and 0.68 for 10-year yields. When U.S. yields climb, USD/JPY gravitates higher; when they fall, the pair retraces. Treasuries will be tested this week with 2-, 5-, and 7-year auctions, following a sharp yield decline over the past two months. A rebound in yields could push USD/JPY back above 149.00 resistance, while weak demand risks fueling a slide toward 145.48.

Tokyo CPI and Japanese Inflation Outlook

Japan’s core inflation held steady at 1.6% YoY in August, but services prices remain sticky. Markets will focus on Tokyo CPI this Friday, a reliable lead indicator for national inflation. A strong print could strengthen expectations for an October hike, lifting yen demand. Conversely, soft data could reinforce caution and allow USD/JPY to retest 149.35 or even the 151.00 resistance.

Technical Landscape: 145.90 Support and 149.00 Resistance

Technically, USD/JPY carved out a hammer candle at 145.90 after the Fed cut, signaling strong demand. RSI sits above 50 and MACD momentum leans bullish, suggesting buyers are defending support. The pair remains boxed between 146.50–149.00, with 149.00 the immediate ceiling. A breakout above this level exposes 151.00, while a break below 145.90 opens risk toward 144.40 and 142.42.

Market Drivers This Week

The focus now shifts to preliminary U.S. PMIs on Tuesday, followed by jobless claims Thursday and the critical PCE inflation and consumption data on Friday. Multiple Fed officials, including Powell and Williams, will speak through the week, and dovish signals could drag USD/JPY back to 145. On the Japanese side, Services PMI on Wednesday and Tokyo CPI on Friday will be decisive in shaping BoJ policy bets.

Verdict on USD/JPY: Hold With Bearish Bias

With USD/JPY trading at 147.73, the balance of risks remains fragile. Fed cuts signal medium-term dollar weakness, while BoJ hawkish dissent and sticky inflation support yen strength. However, strong U.S. yields continue to limit downside. Until a clear break occurs beyond 149.00 or below 145.90, USD/JPY remains a hold, leaning bearish if Tokyo CPI surprises higher or Fed officials reinforce aggressive cuts.

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