• The USD/JPY price analysis indicates a slight decline in BoJ rate hike expectations.

• The Bank of Japan kept interest rates unchanged as expected on Wednesday.

• The dollar held steady as market participants prepared for the FOMC policy meeting.

The USD/JPY price analysis indicates a slight decline in BoJ rate hike expectations after a cautious tone during the central bank’s policy meeting. The ongoing global trade wars have overshadowed recent upbeat data from Japan. Policymakers are now worried about the likely impact of Trump’s tariffs on the local economy. 

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The Bank of Japan kept interest rates unchanged as expected on Wednesday. Moreover, policymakers emphasized the need for time to assess the likely impacts of US trade policies. This means the central bank might be cautious in making any more moves. Nevertheless, Governor Ueda noted that wage growth and consumption were strong. Therefore, economic factors are lining up for more rate hikes. 

The yen has pulled back sharply from recent peaks due to economic concerns. If Trump’s tariffs affect Japan’s economy, the BoJ will be forced to pause its rate hike campaign to preserve growth. 

On the other hand, the dollar held steady as market participants geared up for the FOMC policy meeting. Economists expect the Fed to keep interest rates unchanged. Therefore, traders will focus on the messaging for clues on future moves. Recent downbeat US data has raised expectations for rate cuts. However, Trump’s tariff moves have raised inflation expectations. Therefore, the Fed has to balance growth and inflation.

USD/JPY key events today

• Federal Funds Rate
• FOMC Economic Projections
• FOMC Statement
• FOMC Press Conference

USD/JPY technical price analysis: Rally pauses after new high

On the technical side, the USD/JPY price has paused its rally and pulled back slightly. However, it still sits above the 30-SMA with the RSI above 50, supporting a strong bullish bias. Moreover, the price still trades in a bullish channel.

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The pause might allow the price to retest the channel’s support and the 149.00 level before the rally continues. The next target for bulls is at the 151.01 resistance level. A break above this level will strengthen the bullish bias. 

On the other hand, if bears overpower bulls, they might push the price below the 30-SMA and the channel support. Such an outcome would indicate a bearish shift in sentiment. It would allow USD/JPY to revisit the 147.02 support level.

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