The aftermath of yesterday's FOMC rate decision was a green light for Dollar bulls, as the DXY index continued a rally from support and a falling wedge formation until pushing back into the 100.22 level. But, as I wrote at the time it was USD/JPY that would likely have significant pull on whether the Dollar rally could continue, and at this point, both markets are down on net following a strong and decisive reversal.
The American currency is losing ground as global central banks signal they could raise rates this year.
USD/JPY drops even as Fed holds hawkish tone
Central bank marathon ends with rate decisions from SNB, BoE, and ECB now behind market. Yen emerged as the strongest performer, supported by a hawkish interpretation of BoJ Governor Ueda's post-meeting remarks.
The pair managed to drop and still faces resistances around 160.20 and 161.95, where each resistance could push for a correction towards the 157.25-65 zone. Above 161.95, the market could enter a new uptrend wave with the first target toward 163.80.
USD/JPY Price Forecast: Retreats below mid-159.00s; bullish potential seems intact
Hajime Takata dissented again, saying inflation is effectively at target and warning that rising import costs mean the Bank should already be running a higher rate.
The US dollar extended its rally after the Federal Reserve held rates steady, reinforcing a “higher for longer” narrative as inflation risks remain elevated. Rising yields have underpinned USD strength, while safe-haven flows have shifted away from the yen and Swiss franc.
USD/JPY jumps and eyes 160.00 as Fed hawkishness lifts US Dollar
Jerome Powell didn't feed the doves at today's presser even though the FOMC projections issued at 2PM ET didn't seem all too hawkish. While the Fed is looking for higher levels of inflation than they were at the last quarterly rate decision in December, they also boosted forecasts for growth this year while maintaining the expectation for the unemployment rate at 4.4%.
Oil market rally provided additional support to the American currency.
The Bank of Japan (BoJ) is likely to keep the policy interest rate unchanged at 0. 75% when it concludes its two-day monetary policy meeting on Thursday, 19 March 2026, as the current elevated oil prices due to a prolonged US-Iran conflict stoke stagflation risk.