USD/JPY Price Forecast: Tests nine-day EMA support after falling below 157.50

USD/JPY loses ground after posting minor gains the previous day, trading around 157.30 during the Asian hours on Tuesday. The currency pair is remaining within a symmetrical triangle, which indicates a period of market consolidation, where neither buyers nor sellers are in control.

The USD/JPY pair is retaining a mildly bearish near-term bias as it sits below the 50-day Exponential Moving Average (EMA) while holding just above the nine-day EMA. This configuration suggests the pair is consolidating under a key dynamic cap, with short-term trend support still intact.

The 14-day Relative Strength Index (RSI) at 49.84 hovers near neutral territory, hinting at balanced momentum rather than a decisive directional push, while the FXS Fed Sentiment Index at 146.89 offers a supportive backdrop but does not override the prevailing technical cap imposed by the 50-day EMA.

The USD/JPY pair could target the initial barrier at the 50-day EMA of 158.02. Further resistance lies at the upper boundary of the symmetrical triangle around 158.90. A successful break above the triangle would cause a bullish revival and support the pair to explore the region around a nearly 40-year high of 163.99, which was reached on July 23.

On the downside, the USD/JPY pair is testing the immediate support at the nine-day EMA of 157.24, followed by the lower boundary of the symmetrical triangle around 155.50. A sustained break below the triangle would expose the 11-month low of 152.10.

Yen positioning pares back as JPY net longs are cut sharply

Analysts at Rabobank highlight a notable shift in speculative positioning, reporting that "JPY net longs have decreased from 120 thousand positions to around 72 thousand." This sharp reduction in bullish Yen exposure underscores how quickly investor sentiment has cooled, even as policy developments in Japan remain in focus.

Cook flags AI and geopolitical risks as inflation drivers, keeps Dollar bulls

Fed’s Cook delivered a slightly more hawkish-than-usual tone, with a 7/10 FXS Speechtracker score marginally above the 6.9/10 historical average, as Cook highlighted “continued inflation pressure” in coming months from artificial intelligence and Middle East conflict while stressing that the labor market is “well positioned” to absorb further rate increases. The emphasis on broadening inflation pressures, the willingness to contemplate additional hikes, and the warning that AI-driven productivity gains will not arrive in time to offset this year’s price dynamics all reinforce a bias toward tighter policy, even as Cook acknowledges only modest medium-term disinflation from technology and potential temporary labor-market disruptions that the Fed would struggle to counter without reigniting inflation.

The FXS Fed Sentiment Index slipped by 0.63 points to 146.89, indicating a modest pullback in perceived hawkishness despite remaining deep in hawkish territory. With the index far above the neutral 100 threshold and the speech score above the established baseline, the Fed still signals a policy stance supportive of the Dollar, even if the incremental tone today is slightly less hawkish than recent peaks.