USD/JPY Slides on US-Iran Deal as BoJ and FOMC Decisions Loom

Market Reaction to US-Iran Deal

The US dollar retreated across major pairs on Thursday following President Trump's cancellation of planned military strikes on Iran and his announcement of an impending deal. The move immediately dampened expectations for Federal Reserve tightening, with markets now pricing in 16 basis points of rate hikes by year-end, down from 24 bps prior to the deal.

Central Bank Focus Intensifies

Attention turns to the Bank of Japan (BoJ) and Federal Open Market Committee (FOMC) meetings this week. The BoJ is expected to raise rates by 25 bps to 1.00% on Tuesday, while signaling a pause in bond tapering from the next fiscal year. The FOMC is likely to hold rates steady on Wednesday, though traders will scrutinize its dot plot and economic projections for forward guidance.

Technical Outlook for USD/JPY

On the daily chart, USD/JPY faces resistance near its June cycle high of 162.00, with a more hawkish BoJ outcome potentially pushing prices toward 158.00 support. The 4-hour timeframe shows an ascending trendline acting as a floor for buyers, while sellers target a break below the 158.00 level. A symmetrical triangle pattern on the 1-hour chart suggests consolidation ahead of key catalysts.

Upcoming Catalysts

• BoJ rate decision (Tuesday)
• FOMC policy meeting (Wednesday)
• US Jobless Claims (Thursday)
• Japanese CPI data (Friday)

Risk Considerations

While the US-Iran deal has eased geopolitical risks and oil prices, traders should monitor whether declining energy costs translate into sustained disinflation or fuel demand-driven economic momentum. The BoJ's policy shift and Fed's tone on economic resilience will be critical for USD/JPY direction.

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