USD/JPY Analysis: BoJ Tightens the Grip — Will the Yen Reverse Course?

On June 16, the Bank of Japan raised its policy rate to 1.0% (7-1 vote) and confirmed a gradual taper of government bond purchases, settling at a "cruising" pace of ¥2 trillion monthly from April 2027. The message is clear: normalisation continues, as inflation risks remain skewed to the upside of the 2% target.

For the yen, the medium-term picture remains constructive, though not without friction — one dissenter warned that Middle East tensions threaten output and jobs more than prices. The BoJ has also built itself a safety net, ready to intervene should yields spike unexpectedly.

Technical Analysis

The rate hike didn’t boost the yen. Still, USD/JPY continues to struggle against the formidable resistance at 160.00, a level that carries weight both psychologically and technically. This zone has already rejected multiple advances throughout 2026, and price now approaches it once again — setting the stage for a decisive test.

Bullish scenario: a confirmed break above 160.00-161.00 would need to be followed by a retest on the 4H chart, with a subsequent break of the highs that triggered the initial move — only then would the breakout gain real confirmation, opening the path toward 162.00 and a retest of the 2024 highs. Without this follow-through, the pair may continue to struggle beneath this psychological ceiling, capped by repeated rejection.

Bearish scenario: early confirmation of a reversal would come from a break of the first key support at 159.60-159.80, where the 200-period EMA on the 4H chart is already being tested, much as it has held in the past. A more decisive support could be at 157.80-158.00; a break below this level could trigger a sharper decline. Reinforcing the bearish case is a notable RSI divergence since 18 May, with lower highs on the oscillator against higher highs on price — a classic signal of fading bullish momentum.

The line in the sand is drawn at 160.00-161.00: whoever crosses it first, dollar or yen, will likely set the tone for the months ahead.

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