Can USD/JPY Hold Above 160? BoJ and Fed Leave Traders Guessing

USD/JPY eased below 160.50 on Friday after recovering from a two-month low reached in the previous session. The pair remains volatile as traders continue to assess the Bank of Japan's policy outlook and the possibility of further official intervention.

The BoJ left interest rates unchanged, a decision that largely matched market expectations. The focus quickly shifted to Governor Kazuo Ueda, who reiterated that the central bank remains open to further rate hikes if economic and inflation conditions evolve as expected.

The yen, however, struggled to attract sustained buying. Investors remain cautious after Thursday's sharp rally, which many market participants believe was driven by suspected intervention from Japanese authorities rather than a fundamental shift in monetary policy.

The US dollar also found support after the Federal Reserve kept rates unchanged at 3.50%-3.75%. While policymakers left borrowing costs on hold, the 9-3 voting split highlighted that several officials still favour tighter policy, reinforcing expectations that US interest rates may stay elevated for longer.

From a technical perspective, 160.50 has become the first resistance level after limiting the latest rebound. On the downside, 159.00 is the initial support, with a break below that area potentially opening the way back toward Thursday's low near 158.00.

For now, USD/JPY is likely to remain highly sensitive to comments from Japanese officials and shifts in US rate expectations. Any renewed signs of intervention could trigger another sharp move in the yen, even if the broader policy divergence between the Fed and the BoJ remains in place.