USD/JPY Holds Below 162.00 as Fed Outlook Continues to Support the US Dollar

USD/JPY remained near 161.70 during Tuesday's trading session, continuing to move within a relatively narrow range below the 162.00 level. According to UOB Research, the pair has maintained its recent consolidation while broader market expectations continue to support the US Dollar.

During Monday's session, USD/JPY traded between 161.51 and 161.84, remaining within the range previously identified by UOB Research. The pair closed at 161.73, reflecting limited price movement as investors waited for new economic or policy developments.

According to UOB Research, the broader trend remains constructive as long as the 161.25 support level continues to hold. However, the longer the pair remains below the recent highs, the more closely investors are likely to watch for signs that upward momentum is slowing.

One of the main factors supporting USD/JPY continues to be the difference in monetary policy between the Federal Reserve and the Bank of Japan. According to CME FedWatch, markets continue to expect the possibility of another US interest-rate increase later this year, while the Bank of Japan has maintained a cautious approach toward further policy tightening. This interest-rate differential has continued to provide support for the US Dollar against the Japanese Yen.

From a technical perspective, USD/JPY continues to trade within a consolidation pattern. The 161.25 area remains an important support level, while 162.00 continues to represent a key resistance level. A sustained move beyond either level may provide additional direction for the currency pair, although investors generally look for confirmation through price action and supporting market developments.

What to Watch

Support at 161.25

Investors will continue monitoring whether USD/JPY remains above the 161.25 level. A move below this area could indicate weakening short-term momentum.

Resistance near 162.00

A sustained move above 162.00 would represent a new technical development and may attract additional market attention if supported by economic data.

US Nonfarm Payrolls (Thursday)

The US employment report is expected to provide further insight into the outlook for Federal Reserve policy. Investors will assess whether the data changes expectations for future interest-rate decisions.

Bank of Japan policy signals

Market participants will continue monitoring comments from Japanese authorities for any indication of changes in monetary policy or official views on exchange-rate developments.

Source: UOB Research, CME FedWatch, Bloomberg survey.