The Japanese yen edged higher Monday after touching a two-week low against the U.S. dollar, with gains tempered by diverging monetary policies between Tokyo and Washington. The USD/JPY traded above the 148.00 level, supported by fresh momentum on technical charts. Daily oscillators are showing positive traction, but the rally faces resistance near the 200-day simple moving average at 148.60.
If the pair sustains strength above that threshold, it could extend toward the 149.00 round figure and test the monthly swing high near 149.20. On the downside, immediate support lies at 147.70–147.65, followed by 147.00. A decisive break lower could expose 146.20 before slipping toward 145.50, last seen on July 7.
Diverging Central Bank Paths
The Bank of Japan (BoJ) on Friday held its target rate steady at 0.50% for the fifth consecutive meeting, though two members dissented in favor of a hike. While policymakers continue signaling eventual normalization, concerns over domestic political uncertainty and U.S. tariff headwinds suggest Tokyo may delay tightening.
In contrast, the Federal Reserve last week lowered its benchmark rate for the first time since December but signaled two additional cuts later this year. Chair Jerome Powell described the move as “risk management” and stressed no urgency for aggressive easing. The Fed’s cautious stance has bolstered the dollar, limiting the yen’s safe-haven appeal.
Other monetary developments shaping sentiment include:
- Japan: Chief Cabinet Secretary Yoshimasa Hayashi, a prime ministerial contender, pledged an economic package to offset rising living costs.
- China: The People’s Bank of China kept one-year and five-year Loan Prime Rates at 3.00% and 3.50%, respectively, for a fourth month.
Fed Commentary in Focus
With no major U.S. or Japanese economic releases due Monday, traders are watching speeches from several FOMC members, including Powell, for fresh policy clues. More than a dozen Fed officials are expected to speak this week, setting the tone for U.S. dollar demand.
Market analysts caution that while the yen has recovered from last week’s weakest levels since early July, investor sentiment remains fragile. A stronger dollar, combined with geopolitical uncertainty, could continue to weigh on the Japanese currency unless the BoJ signals a firmer path toward normalization.