- USD/JPY forecast remains mildly soft ahead of the FOMC rate decision.
- Next Fed Chair headlines keep the markets uncertain.
- Technically, the price could test the 200-day moving average before accumulating sufficient buying.
The USD/JPY price traded with mild softness on Tuesday as the Dollar Index drifted lower following fresh headlines about the next Fed leadership. The US dollar also remains under pressure amid the looming Fed rate decision today. Meanwhile, the US JOLTS Job Openings data provided some relief to the pair.
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The delayed data showed a slight improvement in the labor markets, but the figures are not strong enough to dispel the cooling signs. The job openings are drifting to multi-year lows, highlighting that the labor market conditions are easing rapidly than expected. The data holds more weight, as it is the final indicator before the Fed’s rate decision, with the November NFP data set scheduled for release next week. This cements the dovish Fed odds, with almost certain rate cut.
Political developments are also affecting the markets. According to the Wall Street Journal, the US President is preparing a final round of interviews with potential candidates to replace Fed Chair Powell. The news injected uncertainty into global markets, particularly regarding the Fed’s monetary policy path for 2026. Kevin Warsh, a potential candidate, is viewed as more hawkish than Kevin Hassett. Market participants remain sensitive to the leadership shift, as it could alter expectations for Fed policy.
From the Japanese side, the yen remains bid due to safe-haven flows as the global risk sentiment softened ahead of the key FOMC decision. The Bank of Japan continues to offer no new catalyst to the market, while its policy remains accommodative and yields are contained; the USD/JPY pair still depends on the Fed and US economic data.
USD/JPY Key Events Ahead
Today’s essential data ahead of the FOMC decision is the Employment Cost Index, which can provide a temporary impetus to the market. Overall, the pair remains vulnerable to further downside if US yields continue to ease after the soft JOLTS print.
Traders are now watching Powell’s press conference and the updated dot plot for clues on how aggressively the Fed intends to cut rates through 2025. Until then, USD/JPY is likely to trade with a mild bearish bias, lacking conviction to the upside.
USD/JPY Technical Forecast: Correction Before Upside
The 4-hour chart for USD/JPY shows a bullish crossover of 20- and 50-period MA. However, the 100- and 200-period MAs stay flat, pointing to a lack of market catalyst. Meanwhile, the RSI is flat near the overbought region. The conditions suggest a potential pullback to 156.00 before the upside continuation.
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Conversely, moving below the 156.00 mark could augment selling pressure, moving to the 200-period MA and the demand zone near 155.00.
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