USD/JPY Breaks Higher as Fed Officials Signal More Tightening Ahead

Traders' Opinions

Summary:

USD/JPY rises toward 155.50 after the Fed delivered a 25bp hike and signaled that further tightening remains likely. Higher inflation forecasts and resilient US economic projections are supporting the Dollar.

BUY USDJPY

Close Time

CLOSED

155.649

Entry Price

158.500

154.000

156.731 +0.781 +0.50%

232.6

Pips

Profit

154.000

157.975

Exit Price

155.649

Entry Price

158.500

USD/JPY pushed to fresh weekly highs on Thursday, climbing toward the 155.50 region as the US Dollar strengthened following the Federal Reserve’s widely expected interest-rate increase.

The Fed delivered a 25-basis-point hike, with the Dollar resuming its weekly advance shortly after the announcement. With the rate increase largely anticipated, attention quickly shifted toward the Federal Open Market Committee’s updated projections, which indicated that most policymakers believe additional tightening will be necessary before the end of the year.

The latest projections showed a distinctly hawkish tilt. Of the 18 Fed officials, 12 anticipate another 25-basis-point increase this year, while four see room for two additional hikes. Only two officials expect rates to remain unchanged following the latest move. That distribution keeps the prospect of another increase firmly on the table and provides continued fundamental support for the Greenback.

Inflation remains central to the Fed's outlook. Policymakers raised their end-2026 projection for PCE inflation to 3.7% from 3.6%, while the core measure was revised to 3.4% from 3.3%. The adjustments suggest officials remain concerned that price pressures could prove more persistent than previously anticipated.

At the same time, the Fed's broader economic projections remain relatively resilient. Officials lowered their expected 2026 unemployment rate to 4.1% from 4.3%, while GDP growth was revised slightly higher to 2.3% from 2.2%. The longer-run growth estimate remained unchanged at 2.0%.

The combination of higher inflation forecasts, a stronger employment outlook and slightly improved growth expectations gives policymakers greater room to maintain restrictive monetary policy. That has helped the Dollar retain momentum and pushed USD/JPY further above the 155.00 threshold.

For now, the fundamental backdrop remains supportive for USD/JPY, particularly while markets continue pricing another Fed increase before year-end. The next test will be whether the Dollar can maintain its post-Fed momentum as investors digest the central bank's guidance and reassess the path for US rates.

Technical Analysis

USD/JPY is consolidating around 155.63 on the 1-hour chart following its latest push above 156.00. The pullback appears corrective for now, with price retreating into an important Fibonacci and horizontal support cluster while the short-term recovery structure remains intact.

The latest advance reached approximately 156.30–156.40 before encountering selling pressure. Since then, USD/JPY has retraced toward the 0.50 Fibonacci region around 155.55, an area that also overlaps with the broader 155.35–155.65 support zone. The confluence makes this an important level for determining whether buyers can initiate the next leg higher.

Price is also maintaining the rising short-term trendline formed during the recovery from the September lows around 153.00. As long as this structure remains protected, the current decline can be treated as a retest rather than a bearish reversal. A slightly deeper correction could reach the 0.618 level around 155.35, while the 0.786 retracement near 155.10 provides another layer of support.

On the upside, bulls first need to reclaim 155.90–156.00, followed by the recent swing high around 156.30–156.40. A decisive break above that peak would confirm continuation and could trigger a much stronger expansion toward the major 158.30–158.60 resistance zone.

The chart then leaves room for another brief pullback around 158.50 before a continuation toward the larger 160.50–160.80 supply zone. This remains the primary upside objective if the developing higher-low structure continues to hold.

A sustained break beneath 155.00, however, would weaken the immediate bullish setup and increase the possibility of a deeper retracement toward 154.60 and potentially the lower support structure.

Overall, USD/JPY appears to be undergoing a controlled correction within a developing bullish recovery. Holding the 155.35–155.55 region would keep the path open for a renewed challenge of 156.30, followed by 158.50 and ultimately 160.60.

TRADE RECOMMENDATION

BUY USD/JPY

ENTRY PRICE: 155.65

STOP LOSS: 154.00

TAKE PROFIT: 158.50

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USD/JPY Breaks Higher as Fed Officials Signal More Tightening Ahead

Technical Analysis

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