USD/JPY Awaits Fresh Fed Signals for Directional Clues

USD/JPY remains on a recovery footing on Wednesday as markets await the day’s key event, the Federal Reserve’s interest rate decision.

The Federal Open Market Committee is widely expected to raise rates by 25 basis points. However, investors will focus even more closely on guidance from Fed Chair Warsh for clues on the policy outlook and the dollar’s next move.

Two main scenarios are in focus. A rate hike accompanied by a hawkish message that signals additional tightening could provide fresh momentum for the dollar. Alternatively, a rate increase paired with more balanced or cautious remarks may cap further gains.

Under the first scenario, USD/JPY could extend its advance sharply. In the second, upside may prove limited or even give way to modest weakness if the Fed reiterates its data-dependent approach, emphasizing that future policy decisions will be guided by incoming economic indicators. A more dovish tone, suggesting no additional tightening in the months ahead, would further weigh on the dollar.

From a technical perspective, the latest rally has generated early bullish signals after breaking above the top of a five-day consolidation range and clearing initial resistance at 154.65, the 23.6% Fibonacci retracement of the 160.39-152.88 decline, reinforced by the falling 10-day moving average. Sustained closes above this level are needed to maintain a mildly bullish bias and keep attention focused on the key 155.75 barrier, which marks the 38.2% retracement of the same decline.

On the downside, a return below 154.65 on a closing basis would weaken the recovery outlook. The broader daily-chart structure remains bearish, highlighted by multiple moving-average bear crosses and persistent negative momentum, suggesting that stronger gains are still required to signal a more meaningful trend reversal.

Res: 155.75; 156.64; 157.00; 157.52
Sup: 154.65; 154.21; 153.24; 152.88