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Published: 28 August 2026,06:03
Daily Market Analysis New
Key Takeaways:
*USD/JPY: Trading around 159.3–159.5, with the pair approaching the key 160 psychological level.
*Rate differential: The Fed’s 3.50%–3.75% policy rate versus the BoJ’s 1.00% continues to favour the dollar and weigh on the yen.
*Deputy Governor Ryozo Himino signalled that timely rate hikes could help contain inflation, reinforcing expectations for further policy normalisation.
The Japanese yen remains under pressure against the dollar, with USD/JPY trading around 159.3–159.5, as the wide US-Japan interest-rate differential continues to favour the greenback. The Federal Reserve currently maintains its policy rate at 3.50%–3.75%, compared with the BoJ’s 1.00%, leaving a substantial yield advantage for US assets. Recent resilient US economic data, sticky inflation and hawkish Fed commentary have therefore helped keep USD/JPY elevated. The pair is once again approaching the psychologically important 160 level, where intervention concerns become increasingly relevant.
At the same time, the yen is receiving some fundamental support from the Bank of Japan’s increasingly hawkish stance. Deputy Governor Ryozo Himino warned that timely rate increases could help prevent inflation from accelerating and avoid the need for more abrupt tightening later. Although he stopped short of signalling an imminent September hike, his comments reinforced expectations that the BoJ is gradually moving towards further normalisation. Markets continue to assign relatively high odds to a September BoJ rate hike, providing an underlying reason for traders to remain cautious about pushing USD/JPY significantly above 160.
The yen also retains support from the possibility of Japanese government intervention, particularly after the large coordinated US-Japan intervention earlier in the summer. Much of the intervention-driven yen appreciation has already been retraced, with USD/JPY recovering towards 159–160. This means the market is increasingly focused on whether Japanese authorities would tolerate another sustained move above 160. Consequently, even if US yields rise and the dollar strengthens, intervention risk could make traders reluctant to aggressively chase USD/JPY higher.
Near term, however, US monetary policy remains the dominant driver. A hawkish Warsh speech could widen the US-Japan yield differential further and push USD/JPY towards or above 160, while a dovish or unexpectedly cautious Fed message could trigger dollar selling and allow the yen to recover. The yen therefore remains fundamentally fragile but increasingly supported by BoJ normalisation expectations and intervention risk, creating the potential for sharp two-way moves around the 160 level.
Technical Analysis
USD/JPY has turned sideways-to-bullish after recovering from the sharp sell-off toward the 154.55–157.50 support zone. Price has since reclaimed 157.50 and is now consolidating around 159.45, with the pair gradually forming higher lows. A sustained break above 160.50 would strengthen the bullish outlook and expose 163.70 as the next major resistance. On the downside, 157.50 remains the key support, while a break below it would weaken the recovery and expose 154.55.
Momentum indicators are leaning slightly bullish. RSI has risen to 58, remaining above the 50 level and indicating that buying momentum is still present without reaching overbought territory. Meanwhile, MACD is mildly bullish, with the MACD line above the signal line and the histogram slightly positive, suggesting that upside momentum is gradually rebuilding, although the relatively small histogram indicates that momentum remains limited. Overall, the bias remains bullish above 157.50, with a breakout above 160.50 needed to confirm stronger upside momentum toward 163.70.
Resistance Levels: 160.50, 163.70
Support Levels: 157.50, 154.55
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