US dollar rallies as Fed signals limit easing, while BOJ caution risks further yen weakness. USD/JPY and EUR/JPY bulls eye breakout levels.
By : Matt Simpson, Market Analyst
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.
View related analysis:
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Chart prepared by Matt Simpson - data source: LSEG
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 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.
Chart analysis by Matt Simpson - data source: TradingView USD/JPY
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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 sits at the high-volume node (HVN) at 174.26 and the monthly R2 pivot at 174.75, which could temporarily cap upside and prompt a minor pullback.
Chart analysis by Matt Simpson - data source: TradingView EUR/JPY
Key Economic Events for Traders (AEST / GMT+10)
07:00 NZD Westpac Consumer Sentiment (NZD/USD, AUD/NZD, NZD/JPY)
08:45 NZD Exports, Imports, Trade Balance (Aug) (NZD/USD, AUD/NZD, NZD/JPY)
09:01 GBP GfK Consumer Confidence (Sep) (GBP/USD, EUR/GBP, GBP/JPY)
09:30 JPY CPI, National CPI, National Core CPI (Aug) (USD/JPY, EUR/JPY, Nikkei 225)
09:50 JPY Foreign Bonds Buying, Foreign Investments in Japanese Stocks (USD/JPY, EUR/JPY, Nikkei 225)
12:30 JPY BoJ Monetary Policy Statement (USD/JPY, EUR/JPY, Nikkei 225)
13:00 JPY BoJ Interest Rate Decision (USD/JPY, EUR/JPY, Nikkei 225)
13:00 NZD Credit Card Spending (Aug) (NZD/USD, AUD/NZD, NZD/JPY)
16:00 GBP Retail Sales, Core Retail Sales, Public Sector Borrowing, Public Sector Net Cash Requirement (Aug) (GBP/USD, EUR/GBP, FTSE 100)
16:30 JPY BoJ Press Conference (USD/JPY, EUR/JPY, Nikkei 225)
17:00 EUR German PPI (Aug) (EUR/USD, EUR/GBP, DAX)
19:00 EUR ECB President Lagarde Speaks (EUR/USD, EUR/GBP, DAX)
19:30 EUR ECB Supervisory Board Member Tuominen Speaks (EUR/USD, EUR/GBP, DAX)
20:00 EUR ECOFIN Meetings, Eurogroup Meetings (EUR/USD, EUR/GBP, DAX)
21:30 INR FX Reserves (USD) (USD/INR, EUR/INR, GBP/INR)
22:00 CNY FDI (Aug) (USD/CNH, AUD/CNH, CNH/JPY)
22:30 CAD Retail Sales, Core Retail Sales (Jul) (USD/CAD, EUR/CAD, CAD/JPY)
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