USD/JPY Price Forecast: 20-day EMA becomes dynamic support now

The US Dollar (USD) is up 0.15% to near 160.00 against the Japanese Yen (JPY) during the European trading session on Tuesday. The USD/JPY pair strengthens as the US Dollar outperforms due to surging United States (US) Treasury Yields amid fiscal concerns and questions over the credibility of the Federal Reserve’s (Fed) decision-making.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.2% higher to near 99.60. 10-year US Treasury Yields hit a fresh 19-month high at 4.78% and are approaching the multi-year high of 4.81%.

US curve reprices hawkish Fed as long-end selloff flags fiscal and credibility fears

Strategists at BNY Markets highlight that, although he “stopped short of explicit forward guidance in his Jackson Hole address,” Fed Chair Kevin Warsh “stepped as close to the line as possible in advocating a hike,” with the market now “pricing an almost two-thirds probability for one at the FOMC’s September 16 meeting.” Beyond that decision, they note that “the view is murkier,” but futures still “see at least an additional hike into early 2027 and more upside – although not a full hike – beyond that, with a total of about two-and-a-half currently priced.”

BNY observes that the rate repricing has been accompanied by a notable move at the back end of the curve: “The long end has sold off, betraying the view of many (including ours) that a more hawkish Fed would help bring yields lower as credibility would be seen to be enhanced.” Instead, “both the 10y and 30y yields have moved much higher since Friday,” a development that “continues to reinforce for us the view that the long end of the curve is being led by something other than mere inflation expectations and policy conjectures.” BNY concludes, “We think of fiscal concerns and doubts about institutional credibility as the culprits.”

Meanwhile, the Japanese Yen struggles to attract bids even as market experts are confident about the Bank of Japan (BoJ) raising interest rates in the policy meeting this month.

Yen under pressure as markets ramp up BoJ hike expectations

Analysts at Danske Bank highlight that the latest commentary from the BoJ has sharpened market expectations for further tightening. They note that “markets were already pricing a high likelihood of a 25bp hike to 1.25% at the September meeting,” but stress that “the remarks added to the pressure with markets now pricing a rate hike by 70%.”

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 159.91. The pair holds above the 20-day exponential moving average (EMA) at 159.59, which suggests that the near-term bias remains mildly bullish as price respects trend support. Momentum is constructive rather than aggressive, with the 14-day Relative Strength Index (RSI) hovering near 51, hinting at a modest upside tilt after recovering from previously oversold readings.

On the downside, immediate support is located at the 20-day EMA around 159.59, where buyers have scope to defend the current upswing. On the upside, the pair needs a decisive break above the August 28 high at 160.20 to extend the rally towards the July 31 high at 160.88.