Forex News
- EUR/JPY may find initial support at the descending channel bottom near 177.40.
- The 14-day Relative Strength Index near 32 signals persistent downside pressure.
- The primary barrier is the nine-day EMA at 179.53.
EUR/JPY declines after three days of gains, trading around 178.90 during Asian hours on Thursday. Technical analysis of the daily chart shows the currency cross trading within a descending channel, keeping the overall bearish bias.
The EUR/JPY cross is keeping a bearish near-term tone as it holds below both the nine- and 50-period Exponential Moving Averages (EMAs). The currency cross’s failure to reclaim these short- and medium-term averages suggests rallies are being capped.
The 14-day Relative Strength Index (RSI) around 32 hints at lingering downside pressure, with the cross hovering just above oversold territory rather than staging a robust rebound.
The EUR/JPY cross may fall toward the primary support at the lower boundary of the descending channel around 177.40, followed by nearly an 11-month low of 175.70, recorded in November 2025.
On the upside, the EUR/JPY cross could target the nine-day EMA of 179.53, followed by the 50-day EMA of 182.84. Further resistance lies at the upper boundary of the descending channel around 185.10, followed by the all-time high of 187.95 set on April 17.
Euro volatility firms as markets brace for FOMC
Strategists at Scotiabank note that overnight Euro volatility has picked up ahead of the FOMC, with “overnight EUR vol has firmed modestly, implying a breakeven move in spot of about 50 pips.” They point out that this is “a bit below recent peaks,” which in their view suggests “markets may have largely priced in a hawkish Fed outcome” at this stage.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.06% | -0.14% | 0.04% | -0.21% | -0.18% | -0.03% | |
| EUR | -0.04% | 0.03% | -0.18% | 0.00% | -0.26% | -0.18% | -0.06% | |
| GBP | -0.06% | -0.03% | -0.19% | -0.02% | -0.28% | -0.21% | -0.06% | |
| JPY | 0.14% | 0.18% | 0.19% | 0.13% | -0.07% | -0.06% | 0.09% | |
| CAD | -0.04% | -0.00% | 0.02% | -0.13% | -0.23% | -0.19% | -0.03% | |
| AUD | 0.21% | 0.26% | 0.28% | 0.07% | 0.23% | 0.07% | 0.18% | |
| NZD | 0.18% | 0.18% | 0.21% | 0.06% | 0.19% | -0.07% | 0.18% | |
| CHF | 0.03% | 0.06% | 0.06% | -0.09% | 0.03% | -0.18% | -0.18% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
NBC Economics and Strategy, authored by Taylor Schleich and Ethan Currie, reviews the latest Federal Reserve decision following strong CPI data. The Fed delivered a widely expected rate hike and signaled support for restrictive policy for a prolonged period. Their dot plot shows policy rates staying above 3.5%–3.75% until late 2029, flattening the curve as front-end yields rise while long-end yields hold steady.
Fed stance, dots and curve dynamics
"After last week’s CPI report, there was little doubt about this one. A hike today was widely expected but this doesn’t appear to be a meek or reluctant rate increase (even though the Fed held out for a long time before tightening). Based on an upwardly revised dot plot, there seems to be relatively broad support for more restrictive monetary policy for a significant period of time—the Fed doesn’t see a return to a 3.5% to 3.75% range until the end of 2029."
"This supported a significant flattening of the curve with front-end yields rising and long-end yields holding steady. Not surprisingly, Warsh was at pains to stress his commitment to delivering price stability. But unlike prior decisions, the bulk of the market move came before the Chair spoke, with this presser proving relatively uneventful."
"The market reaction is not surprising based on what was delivered/signalled. But the Fed will still need to follow through on this hiking bias for the longer-end to remain somewhat contained. We do believe that further tightening is in store, likely at the next decision in late October."
"From there however, the outlook becomes a bit more muddied. Despite Warsh’s outwardly hawkish stance, the Fed has demonstrated time and again that they’ll err on the side of accommodation. That doesn’t mean they’ll be easing early next year but if inflation begins to cool (as it’s widely expected to), we think it’ll be difficult to build a consensus around hiking a third (or fourth, or fifth, etc.) time."
"We see a 4.25% upper bound target representing the peak of what could be a brief tightening cycle. Eventual cuts may be dictated by the sustainability of the economic expansion (i.e., the AI boom). Relative to the very gradual easing path laid out in this dot plot, we think risks are skewed to earlier and more significant rate cuts."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
TD Securities analysts highlight that the Federal Reserve’s 25bp hike and hawkish projections have boosted its inflation-fighting credibility, making nominal and real US rates attractive. They see limited upside for 10-year yields due to already-hawkish pricing and growth concerns, and argue that a re-flattening curve creates opportunities to enter steepeners over the coming months.
Attractive yields and curve steepeners
"Rates: While yields could test higher in the very short term, nominal and real rates remain attractive."
"Already-hawkish Fed pricing, increased inflation-fighting credibility, and worries about higher rates impacting growth, should help keep 10y yields contained."
"The re-flattening of the curve also offers an opportunity for investors to enter steepeners, which should remain the path of least resistance in the coming months."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- The Canadian Dollar is under pressure against the US Dollar after the Fed’s monetary policy decision.
- Traders have raised hawkish Fed bets as the central bank warns of upside inflation risks.
- Oil prices struggle to sustain above the $100 mark.
The Canadian Dollar (CAD) trades weakly against the US Dollar (USD) on Thursday. In the Asian session, the USD/CAD pair posts a fresh five-week high to near 1.4000. The Loonie pair gains significantly as the US Dollar outperforms, following the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.22% | 1.17% | 1.61% | 0.88% | 0.86% | 1.64% | 1.19% | |
| EUR | -1.22% | -0.07% | 0.41% | -0.35% | -0.35% | 0.41% | -0.03% | |
| GBP | -1.17% | 0.07% | 0.48% | -0.25% | -0.28% | 0.49% | 0.00% | |
| JPY | -1.61% | -0.41% | -0.48% | -0.77% | -0.81% | -0.07% | -0.51% | |
| CAD | -0.88% | 0.35% | 0.25% | 0.77% | 0.02% | 0.76% | 0.28% | |
| AUD | -0.86% | 0.35% | 0.28% | 0.81% | -0.02% | 0.77% | 0.31% | |
| NZD | -1.64% | -0.41% | -0.49% | 0.07% | -0.76% | -0.77% | -0.48% | |
| CHF | -1.19% | 0.03% | -0.01% | 0.51% | -0.28% | -0.31% | 0.48% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades firmly near Thursday’s high at around 100.33.
In the policy meeting, the Fed hiked interest rates by 25 basis points (bps) to 3.75%-4.00%, as expected, after remaining on hold in the last five meetings.
Financial market participants have raised hawkish Fed bets after remarks from Chairman Kevin Warsh that prices pressures are significantly higher for a long time. However, he didn’t deliver any guidance on the monetary policy outlook, as expected.
According to the CME FedWatch tool, the odds of the Fed delivering at least two interest rate hikes by the year-end have increased to 88.7% from 79% seen before the policy announcement.
On the Canadian Dollar front, a pause in the oil price rally has also weighed some pressure. Oil prices struggle to extend the rally above $100, diminishing the appeal of currencies from economies, such as Canada, which are net energy expoerter.
USD/CAD Technical Analysis
In the daily chart, USD/CAD trades at 1.3992. The pair holds above the 20-period Exponential Moving Average (EMA) at 1.3890, keeping the near-term bias bullish as price also sits above a dense Fibonacci support band, including the 38.2% retracement at 1.3980 and the 50.0% level at 1.3898. The Relative Strength Index (14) at 61.2 points to firm, though not extreme, bullish momentum, suggesting buyers remain in control while the latest rebound extends away from the recent lows.
On the downside, immediate support is clustered around the 38.2% Fibonacci retracement at 1.3980, followed by the 50.0% level at 1.3898 and the 20-period EMA at 1.3890, with deeper cushions at the 61.8% retracement at 1.3816 and the 78.6% level at 1.3699. On the topside, initial resistance emerges at the 23.6% Fibonacci retracement at 1.4082, ahead of the cycle high anchor near 1.4247, where a break would be needed to unlock a more extended bullish phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Last release: Wed Sep 16, 2026 18:00
Frequency: Irregular
Actual: 4%
Consensus: 4%
Previous: 3.75%
Source: Federal Reserve
Rabobank’s RaboResearch Global Economics & Markets team reviews the latest FOMC decision, noting a unanimous 25 bps hike in the federal funds rate. The Committee’s projections point to one more hike this year, then a prolonged hold through 2027, with the first cut in 2028. The report highlights a higher neutral rate, a steeper policy path, and the Fed’s determination to protect its monetary policy independence under Chair Warsh.
Fed hikes and long hold signalled
"Today the FOMC unanimously decided to raise the target range for the federal funds rate by 25 bps."
"The Committee’s projections showed that they anticipate another hike before the end of the year, before remaining on hold through 2027. The first cut is expected in 2028."
"The new set of economic projections essentially showed a new reaction function with a much higher policy rate trajectory needed for a similar inflation outcome. This was underlined by an upward revision of the neutral rate."
"Overall, the main message from today’s FOMC decision, projections and press conference is that the Committee is committed to defend its monetary policy independence."
"In fact, the projections suggest that by the time that President Trump leaves office, the Fed’s policy rate will be higher than when Chair Warsh started."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- US Dollar Index rallied following a 25-basis-point rate hike to a target range of 3.75%-4.00%.
- Fed Chair Warsh cited high inflation, with markets pricing a 49.8% probability of an October rate increase.
- Holding above key nine- and 50-day EMAs signals a bullish near-term bias, supporting a constructive recovery.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its winning streak for the sixth successive day and trading around 100.30 during Asian hours on Thursday. The US Initial Jobless Claims data will be released later in the day.
The Greenback remains on a firm footing following an interest rate hike by the US Federal Reserve (Fed), alongside signals that another increase could follow before the end of the year. The central bank raised the federal funds rate by 25 basis points to a target range of 3.75% to 4.00%. The move matched market expectations, representing the Fed's first interest rate increase in three years.
In his post-meeting remarks, Fed Chair Kevin Warsh explained that the rate hike was driven by inflation remaining "too high" and lingering "for too long," describing the action as a "sober" and "responsible decision." Warsh signaled that further rate increases remain on the table in an effort to curb persistent price pressures. Following the announcements, money markets priced in roughly a 49.8% probability of another Fed rate hike at the October meeting, according to the CME FedWatch tool.
Fed’s Warsh underscores inflation fight as economy strength allows focus on price stability
Warsh’s press conference tone was distinctly hawkish, with the 7.4/10 FXS Speechtracker score modestly above the 7/10 historical average, signaling a firmer commitment to tightening policy relative to the established baseline. By stressing that “because of underlying strength of the economy we can afford to focus on price stability” and that “today we took a step toward delivering price stability,” the remarks framed the latest move as a deliberate removal of accommodation driven by persistent inflation trends rather than data noise. Emphasis on full employment, non-restrictive financial conditions, and the primacy of price stability reinforces a narrative that the FED is prepared to keep the pressure on inflation, a backdrop typically supportive of the Dollar and negative for risk-sensitive FX.
The FXS Fed Sentiment Index jumped by +26.07 points to 151.79, firmly in hawkish territory and consistent with the above-baseline FXS Speechtracker score. A reading this far above the neutral 100 mark signals that markets should interpret the decision and tone as a clear hawkish shift, with expectations for tighter policy and a stronger Dollar relative to lower-yielding peers.
Technical Analysis:
In the daily chart, Dollar Index Spot trades at 100.30. The near-term bias is bullish as price holds above both the 50- and nine-day Exponential Moving Averages (EMAs), suggesting a constructive recovery after the recent dip. The 14-day Relative Strength Index (RSI) at 63.58 is approaching overbought territory, hinting that buyers retain control but could face some fatigue if the index extends its advance too quickly, while the elevated FXS Fed Sentiment Index at 151.79 reinforces a supportive policy backdrop for the dollar.
On the downside, initial support is seen at the 50-day EMA at 99.69, followed closely by the shorter nine-day EMA at 99.64, forming a tight demand area that would need to give way to signal a deeper corrective phase. As long as the Dollar Index Spot holds above these moving averages, the technical structure favors further upside, with the psychological 100.00 area now acting as an intermediate floor rather than a cap in the current bullish setup.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- EUR/USD edges lower to near 1.1460 in Thursday’s early Asian session.
- Fed raised interest rates and signaled further increases in borrowing costs in the coming months.
- ECB emphasized a data-dependent approach and won’t pre-commit to further steps on rates.
The EUR/USD pair declines to around 1.1460 during Asian trading hours on Thursday. The Euro (EUR) weakens against the US Dollar (USD) following an interest rate hike from the US Federal Reserve (Fed). The US Initial Jobless Claims data will be released later on Thursday.
The US central bank raised the benchmark interest rate by 25 basis points (bps) to a 3.75%–4.00% range at its September policy meeting on Wednesday, as widely expected. This marks the Fed’s first interest rate hike in three years.
Fed Chairman Kevin Warsh said during the press conference that inflation has been “too high ... for too long.” Updated projections the committee showed that a strong majority of Fed officials think another hike is possible later this year.
"Today’s decisive hike—supported by all FOMC members and paired with an upgrade in the 'dot plot' summary of economic projections—should go a long way toward restoring confidence in the Fed’s commitment to fighting inflation, and help remove a major headwind keeping the dollar restrained," said Karl Schamotta, chief market strategist at Corpay in Toronto.
Across the pond, the European Central Bank (ECB) raised its key interest rates by 25 bps last week. The central bank reiterated it won’t pre-commit to further steps after raising rates for a second time since the Iran war started. ECB President Christine Lagarde said that Eurozone inflation will stay elevated for some time and acknowledged the split in rate pricing.
Eurozone inflation concerns tempered as ECB questions market rate assumptions
Strategists at Rabobank highlight that the ECB is already pushing back against the pace of market repricing. They note that in her press conference last week, President Lagarde “refused to reaffirm that markets ‘understand the ECB’s reaction function well,’” which Rabobank construes “as a hint that the market may be moving faster than the policymakers like.” At the same time, the bank stresses that, “even though energy-driven inflation is set to increase further, price pressures are still mostly driven by that supply shock and there is no evidence that inflation is spreading,” suggesting the ECB may be less inclined to validate the more aggressive tightening path implied by current market pricing.
Technical Analysis: EUR/USD retains a negative outlook below the 100-day SMA
In the daily chart, EUR/USD retains a bearish near‑term bias as spot remains decisively below the 100‑day moving average (MA) and the Bollinger Bands (20) middle line. Price is also holding under the lower Bollinger Band, underscoring downside pressure, while the Relative Strength Index (14) around 31.9 hovers in oversold territory, suggesting that although the pair is stretched on the downside, selling interest still dominates as long as these overhead levels cap recovery attempts.
On the topside, initial resistance aligns with the lower Bollinger Band at 1.1485, followed by the 100‑day MA at 1.1550, which reinforces the broader bearish structure. Above that, the Bollinger middle band at 1.1605 and the upper band near 1.1720 form a wider resistance corridor, where any stronger corrective bounce would likely stall unless buyers reclaim and sustain levels beyond this cluster.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- Silver rises as lower oil prices soften inflation fears, offering underlying support to non-yielding precious metals.
- Drone attacks damaged Saudi Arabia's East-West pipeline, though partial recovery is expected within days.
- Headwinds persist as the Federal Reserve raised interest rates by 25 basis points and signaled further hikes.
Silver price (XAG/USD) gains ground after posting losses the previous day, trading around $63.80 per troy ounce during the Asian hours on Thursday. The white metal finds support as oil prices retreated amid easing concerns over supply disruptions and inflation.
The pullback in crude prices followed reports that Saudi Arabia plans to restore roughly half the capacity of its East-West pipeline within days and return to full operation within six weeks. The key pipeline, which offers an alternative export route bypassing the vulnerable Strait of Hormuz, was damaged in drone attacks last week. In the interim, Saudi Arabia has ramped up efforts to transport larger crude volumes through the strait with assistance from the US military.
Silver may face ongoing headwinds as the US Federal Reserve raised interest rates and signaled another hike before the end of the year. The Fed increased the federal funds rate by 25 basis points to a target range of 3.75% to 4.00%, as expected, marking its first interest rate increase in three years and raising the opportunity cost of holding non-yielding precious metals.
Fed Chair Kevin Warsh said that the move was because "inflation is too high and has been for too long", adding that it was a "sober" and "responsible decision.” Warsh signaled the rate could be increased further in a bid to slow rising prices. Money markets priced in about a 49.8% chance of a Fed hike in October, according to the CME FedWatch tool.
Technical Analysis:
In the daily chart, XAG/USD trades at $63.80, with a bearish near-term bias as price holds below both the nine- and 50-period Exponential Moving Averages (EMAs). The alignment of short- and medium-term EMAs above spot hints that recent rebounds are being capped, while the 14-day Relative Strength Index (RSI) easing to 47.3 reinforces a consolidative-to-soft tone rather than outright oversold conditions.
On the topside, immediate resistance is seen at the nine-period EMA at $64.36, followed by the 50-period EMA at $64.70, where a sustained break would be needed to reopen a stronger bullish phase. On the downside, momentum support is located around the RSI reading near 47, where a deeper slide in price coupled with a drop in RSI toward 40 would likely signal intensifying bearish pressure for silver.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
- USD/JPY struggles to capitalize on its weekly gains registered over the past three days.
- A more hawkish repricing of the BoJ rate hike path underpins the JPY, capping the pair.
- The USD bulls on the post-Fed rally and further draws support from Middle East jitters.
The USD/JPY pair edges lower during the Asian session on Thursday, snapping a three-day winning streak and eroding a part of the previous day's gains to a nearly two-week high. Spot prices currently trade around the 156.00 mark as the focus now shifts to the highly anticipated Bank of Japan (BoJ) rate decision on Friday.
The Japanese central bank is universally expected to raise its benchmark interest rate by 25 basis points (bps) to a 31-year high of 1.25% at the end of the September policy meeting. Moreover, traders have been pricing in a greater chance of a follow-through up move in December amid inflation risks stemming from higher energy prices. This, in turn, is seen as offering some support to the Japanese Yen (JPY) and weighing on the USD/JPY pair.
Meanwhile, the US Dollar (USD) touches a fresh high since late July in the wake of the US Federal Reserve's (Fed) hawkish rate hike on Wednesday. In fact, the US central bank raised borrowing costs for the first rate hike in over three years, and the so-called dot plot indicated one more interest rate increase this year. Moreover, oil-driven inflation fears underpin prospects for further Fed tightening, supporting the USD and the USD/JPY pair.
Apart from this, escalating Middle East tensions further underpin the safe-haven buck. In the latest developments, Iran-backed Houthi rebels said that Saudi aircraft have carried out more than 450 air strikes across Yemen in the past week and claimed that they shot down a Saudi F-15 fighter jet over Marib province. This keeps geopolitical risks premium in play, favouring USD bulls and contributing to limiting the downside for the USD/JPY pair.
USD/JPY 4-hour chart
Technical Analysis
The USD/JPY pair retains a bearish near-term bias below the 156.60-156.65 confluence – comprising the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50.0% Fibonacci retracement. Further up, barriers are seen at the 61.8% level at 157.55 and the 78.6% retracement near 158.81 ahead of the swing high at 160.42.
The setup, however, suggests that rallies remain vulnerable while the broader corrective phase from the cycle top persists. On the downside, initial support emerges at the 38.2% retracement at 155.78, ahead of the 23.6% level at 154.68, while a deeper pullback would expose the structural floor around 152.91.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
US President Donald Trump said that he counseled Federal Reserve (Fed) Chair Kevin Warsh to vote for an interest rate hike because other Fed policymakers were expected to vote that way anyway, the Washington post reported on Wednesday.
"I told Kevin, I said, 'You might as well vote with the board because it's just not going to matter. . . . The board is very hostile,” said Trump. "They're very political. They're doing the wrong thing. They're a bunch of politicians. They are people put on by politicians,” he added.
Trump further stated that he doesn't expect Warsh to follow his directions, saying he wanted the Fed "to be independent.”
His comments came hours after Fed officials voted unanimously to raise the interest rates by 25 basis points (bps) for the first time in three years.
Market reaction
At the time of writing, the US Dollar Index (DXY) is up 0.03% on the day at 100.35.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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