US dollar rallies as Fed signals limit easing, while BOJ caution risks further yen weakness. USD/JPY and EUR/JPY bulls eye breakout levels.
The US dollar index rallied for a second day after the Federal Reserve (Fed) delivered a less-dovish-than-expected 25bp cut. Powell’s pushback against a larger 50bp cut wrongfooted traders who had pre-emptively positioned for a jumbo-sized move, which is usually reserved for times of crisis.
The Bank of Japan (BOJ) is expected to hold interest rates at 0.5% today while presenting a cautiously optimistic outlook. Traders will be watching for any hints of an October hike, which an ex-BOJ official believes is likely, even if ultra-dovish Sanae Takaichi wins the election. Strong corporate profits and steady wage hikes are seen as sufficient justification for the BOJ to act in Q4.
However, with no “sources” in the media leaking clues ahead of today’s meeting, it seems unlikely the BOJ will commit to signalling a move now. That could allow the Japanese yen to weaken further in line with recent momentum – a scenario that would continue to support USD/JPY and EUR/JPY bulls.
USD/JPY and EUR/JPY Technical Outlook Ahead of BOJ Decision
USD/JPY Technical Analysis: US Dollar vs Japanese Yen
The US dollar’s rebound and low expectations of a BOJ hike has meant that USD/JPY has failed to break materially lower from its range once again. That said, I have finally removed the lower VPOC in light of Wednesday’s false breakout for bears. But Wednesday’s lower tail does reveal a false break and sharp reversal around the July 20 low (145.76).
Momentum for USD/JPY is pointing firmly higher within its range, and the day closed above its 200-day EMA. A strong directional rally can be seen on the 1-hour chart.
A move up to the top of range and potential retest of the 200-day EMA (147.80) could be on the cards. Bulls could seek pullbacks to the monthly pivot point (147.50) and target the monthly S1 pivot around the 200-day SMA.
Support: 145.76–147.50
Resistance: 147.80–149.00
This outlook has direct implications for traders refining their forex trading strategies, particularly those combining technical setups with macro signals from central banks.
EUR/JPY Technical Analysis: Euro vs Japanese Yen
The euro (EUR) has broken higher against the Japanese yen (JPY), with EUR/JPY now trading at its strongest level since July 2025. This bullish breakout could open the path towards retesting the 2025 highs. With the daily trend structure firmly intact, traders may look for continuation signals on intraday charts or pullbacks into support zones.
Should a retracement unfold on the daily timeframe, key support levels include the monthly S1 pivot at 173.30, the 20-day EMA at 172.65, and the rising bullish trendline from the August low. Given the momentum, a retest – or even a potential breakout – of the 2025 high remains a realistic target for euro bulls.
Near-term resistance: 174.26 (HVN) and 174.75 (monthly R2 pivot).
Market Context: Beyond Currencies
The Fed–BOJ divergence is not only shaping currency pairs but also reverberating across asset classes. Investors are increasingly turning to indices trading to express macro views, while others diversify with crypto investment as the crypto market continues to attract capital amid policy uncertainty. This multi-asset perspective highlights how central bank policy shifts ripple through global markets, creating opportunities beyond FX.
