USD/JPY Forecast: Dollar Yen Ranges at 159.15 Under 160.00
- USD/JPY trades at 159.15, up 0.18% on the day, having spent a fortnight rebuilding from the collapse that opened August.
- The Bank of Japan sits at 1.00%, its highest since 1995, but core inflation has stayed under target for six straight months.
- The 159.39 average caps the pair, and 160.00 above it is the level that would confirm the recovery.
Fundamental Analysis: USD/JPY
The Bank of Japan raised its policy rate to 1.00% on 16 June, the highest since 1995, and held there on 31 July while warning that core inflation could exceed its 2% target. Japan's headline rate accelerated to 1.9% in July from 1.6%, the fastest since December 2025, helped by the scaling back of energy subsidies. Core came in at 1.8%, below target for a sixth consecutive month, which is precisely the tension in this pair: the central bank is now openly hawkish, but the data has not yet given it the mandate to move again.
Against that sits a Federal Reserve holding at 3.50%-3.75%, leaving a differential of roughly 250 basis points in the dollar's favour. That gap is what dragged the pair back from its early August low, and it is why rallies in the yen have repeatedly failed to extend. Three Fed officials dissented in July in favour of tightening, and while the majority is comfortable waiting, the market cannot price a narrowing differential with any conviction while that argument is unresolved.
The result is a pair pinned between a carry advantage that has not gone away and a Japanese central bank that has stopped being passive. Neither side is strong enough to force a trend. The August collapse from 164 showed how quickly positioning can unwind when the yen finds a catalyst, and the slow, grinding recovery since shows how little appetite there is to rebuild those positions aggressively.
Technical Analysis: USD/JPY
The 4-hour chart is dominated by the vertical drop that opened the month, taking the pair from above 164 to roughly 155.70 in the first days of August. Everything since has been repair. From 11 August price has held a band between roughly 158 and 159.50, with a dip to 157.90 on 19 and 20 August that was bought back within two sessions. The fast averages at 158.96 and 159.04 now sit directly beneath price and have flattened, which is what a genuine range looks like rather than a pause in a trend.
Resistance is the 159.39 average, then the 160.00 handle where the slower average sits at 159.99. Support is the 158.96 fast average, with 157.90 marking the floor of the recent range. A close below 157.90 would end the two-week repair and put the early August low back into view.
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