USD/JPY Price Outlook After the Fed Meeting

US Monetary Policy Remains Steady – for Now

The Federal Reserve held interest rates unchanged at 4.50%, reaffirming its cautious stance in the face of persistent inflationary pressures. Despite inflation remaining above the Fed’s 2% target, policymakers signaled the possibility of cutting interest rates later this year, citing the continued resilience of the US economy.

The Fed maintained its forecast for two rate cuts in 2024. Markets expect the first reduction of 25 basis points to occur in September, followed by another similar move in December. However, officials emphasized the need for further clarity on inflation trends, especially as newly implemented tariffs begin to take effect. This uncertainty could postpone any policy shifts until or beyond the September meeting.

Fed Lowers Growth Outlook, Raises Inflation Projections

The central bank also released updated economic projections, reflecting a more cautious outlook. It revised down its GDP growth forecast for 2025 from 1.7% to 1.4%, and for 2026 from 1.8% to 1.6%. At the same time, inflation expectations were raised from 2.7% to 3.0% for 2024, and from 2.2% to 2.4% for 2026.

Labor market projections were also adjusted, with the unemployment rate forecast increasing from 4.4% to 4.5% in 2024 and from 4.3% to 4.5% in 2025.

It is important to note that the previous projections, issued in March, did not account for the impact of the tariffs imposed by the Trump administration in April. The introduction of these tariffs has shifted the Federal Reserve’s economic outlook and led some members of the Federal Open Market Committee to question the feasibility of cutting interest rates this year, as inflation risks may remain elevated due to rising prices from tariffs and the potential for higher energy costs if geopolitical tensions in the Middle East persist.

Nevertheless, the majority of FOMC members continue to support the prospect of two rate cuts before the end of the year.

USD/JPY Outlook: Room for an upside move?

On June 2, the USD/JPY entered a consolidation phase, forming a lower high with a higher low. The pair is currently trading within a trading zone between 144.80 and 146.41 and appears to be positioned for a potential test of the high end of this zone.

A daily close above 146.41 signals a possible start of a bullish momentum, potentially driving the pair toward 149.19. That said, the resistance level at 148.64 (the May 26 high) should be considered.

Key Levels to consider in the Bearish Scenario

Conversely, a daily close below the 144.80 support level could open the door for a move down towards 141.00. In such a case, the ascending trendline originating from the April 22 low may act as support level, alongside the support area located between 144.10 and 143.90.

USD/JPY – Daily Price Chart

Chart Source: ADSS Platform