USD/JPY declines below 148.00 despite US strength, BoJ decision eyed

• The USD/JPY took a hit and declined near 147.50.
• The US reported mixed economic data. Treasury yields are soaring high.
• Investors await BoJ's decision and Japanese inflation figures during the Asian session.

On Thursday, the USD/JPY faced downward pressure, declining near 147.50 and seeing 0.60% losses. On the one hand, hopes of a Bank of Japan (BoJ) policy shift (or a signal) keep the JPY afloat while the USD is holding its ground, driven by US Treasury yields rallying after the Federal Reserve (Fed) decision on Wednesday.

Despite the JPY trading strong against most of its rivals, the BoJ may disappoint markets on Friday and keep its dovish stance. As highlighted, local wage and inflation trends are key drivers in the decision-making process around monetary policy shifts so until those figures don’t align with the bank’s forecast, they won’t consider leaving their negative interest rate policy. However, any additional clues the BoJ gives in its statement will help investors model their expectations regarding the next meetings and affect Yen’s price dynamics.

On the other hand, the Federal Reserve (Fed) was more hawkish than expected on its September meeting with its rate projections as they hinted at one more hike in 2023 and practically delayed rate cuts in 2024. The combination of higher and higher interest rates for longer fueled the US Dollar via higher Treasury yields, which stand at multi-year highs. The 2-year rate is 5.16%, while the 5 and 10-year yields soared to 4.60% and 4.47%, respectively.

Moreover, the US reported mixed data during the session, as Jobless Claims for the second week of September were lower than expected, while the Philadelphia’s Fed Manufacturing Survey declined to 13.5, missing by wide margin expectations. It's worth mentioning that despite the Fed being hawkish in interest rate terms, Chair Powell noted that the next decisions will rely solely on incoming data, so the US price dynamics will see volatility on releasing high-tier economic figures. On Friday, markets await September S&P Global PMI figures.

USD/JPY Levels to watch 

 Despite the daily declines, the USD/JPY suggest that the outlook for the pair on the daily chart is still bullish. The Relative Strength Index (RSI) is favourably positioned in positive territory above its midline but reflects a downward movement. Similarly, Moving Average Convergence Divergence (MACD) depicts red bars, affirming that the bears are gaining ground but aren’t there yet. In line with that, the pair is above the 20,100,200-day Simple Moving Average (SMA), suggesting that the bulls are firmly in control of the bigger picture.

Support levels: 147.10 (20-day SMA), 146.00, 145.00

 Resistance levels: 148.00, 149.00, 150.00.

USD/JPY Daily Chart