USD/JPY Analysis: Yen under pressure ahead of Fed minutes

Recent sessions have not been easy for the Japanese yen, as USD/JPY has gained close to 0.8% over the last five sessions, showing that dollar strength remains relevant in the short term.

Buying pressure has held up partly because of expectations of a more aggressive Federal Reserve, which has continued to support the US bond market and, in turn, the US dollar. For now, the market is focused on the release of the Federal Reserve minutes, as a more restrictive tone could keep buying pressure relevant in USD/JPY over the coming sessions.

Fed minutes day

Today, the market is waiting for the release of the minutes from the Federal Reserve’s latest decision, where investors will look for signs of how concerned the central bank is about inflation. April data already showed inflation at 3.8%, above the 2.00% target, keeping attention on the possibility of a more aggressive tone.

In the statement following the April decision, the Fed mentioned that economic activity continued to expand at a solid pace and acknowledged that inflation could remain an important factor over the coming months. For this reason, the minutes may be important in determining whether the committee sees inflationary pressures as temporary or as a more persistent risk that could change the monetary policy outlook.

So far, the market’s probability outlook shows that, at least through the October decision, there is more than a 60% probability that interest rates will remain at the current 3.75% level. However, the more relevant shift appears toward January 2027, where there is now a probability above 40% that rates could rise toward a new 4.00% reference level. For this reason, today’s minutes could be key in confirming whether a more restrictive Federal Reserve outlook may continue gaining strength over the coming months.

Source: CMEGROUP

The central bank’s stance is important because expectations of a more restrictive Fed have helped keep the US bond market strong compared with other regions such as Japan. Although the US 10-year Treasury yield has shown a slight decline, it remains above 4.6%, near highs not seen since early 2025.

In Japan, 10-year bond yields are also trending higher, but they remain at much lower levels, near 2.8%. This rate differential continues to favor the US bond market and may be reinforcing demand for dollars in the short term, making it harder for the yen to recover consistently.

Source: TradingEconomics

Against this backdrop, the release of the Federal Reserve minutes becomes especially relevant. If the document confirms a more restrictive tone or opens the door to potential rate hikes earlier than expected, it could continue to support US bond yields and keep the dollar strong against its main rivals. For the yen, this scenario could limit a sustained recovery and keep buying pressure relevant in USD/JPY over the coming sessions.

 

Are there risks of possible intervention?

A couple of weeks have passed since reports emerged about potential interventions by Japanese authorities through yen purchases. This event was key, as it drove significant strength in the Japanese currency, supported by purchases estimated in the billions of dollars.

The key point is that the tone from Japanese authorities began to harden when USD/JPY approached the 160 yen per dollar area, and the pair is currently not too far from that level. For this reason, if the pair approaches this zone again, concerns over new interventions focused on yen purchases could return. At the time, these types of events generated moves of more than 2.00% in a single session, making this a relevant volatility factor to monitor.

With this in mind, if the market begins to suspect a possible new intervention as the yen approaches key areas, this external event could help the Japanese currency recover quickly in the short term. This would change the recent dynamic, which has been mainly driven by the rate differential between the United States and Japan, and could generate an important weakening move in USD/JPY over the medium term.

 

Technical outlook for USD/JPY

Source: StoneX, Tradingview

• The bullish trend remains firm: Recent USD/JPY price action continues to show bullish strength and keeps a solid bullish trendline as the main pattern on the chart. As long as no relevant bearish correction appears, this structure could continue to dominate short-term price action. If buying strength holds, the bullish trend will remain the most important technical factor to watch.
   

• RSI: Now, the RSI continues to show consistent readings above the neutral 50 level, suggesting that the average momentum over the last 14 sessions still reflects a relevant buying bias. If this behavior continues, bullish pressure could remain in place over the coming trading sessions.
   
• MACD: A similar scenario can be seen in the MACD, as the histogram remains above the 0 line. This suggests that bullish strength in the average of short-term moving averages remains relevant, reinforcing the importance of the short-term buying bias in USD/JPY.
   

Key levels:

• 160.000 – Key resistance: A relevant psychological level that coincides with recent highs. Moves toward this area could reinforce the current buying bias and open the door to an extension of the bullish trendline over the coming weeks.
   
• 158.244 – Near-term barrier: A neutral zone aligned with the 50-period moving average. Price action that remains too close to this level could reinforce a phase of indecision or even lead to the formation of a short-term range.
   
• 155.470 – Main support: A recent low that coincides with the base of the bullish trendline. This level is critical, as a break below it could fully invalidate the long-term bullish structure and give way to a more dominant selling bias that could extend for several weeks.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25