USD/JPY Price Forecast: 20-day EMA becomes dynamic support now

The US Dollar (USD) has rallied 0.15% to around 160.00 against the Japanese Yen (JPY) in the European trading session on Tuesday. This strengthening comes as the US Dollar outperforms due to rising US Treasury Yields and skepticism surrounding the Federal Reserve’s (Fed) decision-making. As of now, the US Dollar Index (DXY), which measures the Greenback's value against six major currencies, is up 0.2% to near 99.60.

The 10-year US Treasury Yields have reached a fresh 19-month high of 4.78%, nearing the multi-year peak of 4.81%. Among major currencies, the USD is the strongest against the New Zealand Dollar. Strategists at BNY Markets note that while Federal Reserve Chair Kevin Warsh did not explicitly announce forward guidance during his Jackson Hole address, he "stepped as close to the line as possible" by advocating for an increase.

This has led to a near-two-thirds probability of a rate hike at the Federal Open Market Committee's (FOMC) September meeting. Although the long end of the yield curve has declined, suggesting enhanced credibility from a more hawkish Fed, the 10-year and 30-year yields have nonetheless risen since Friday, pointing to factors beyond inflation expectations and policy conjectures.

Analysts at Danske Bank believe that fiscal concerns and doubts about institutional credibility bear the brunt. Meanwhile, the Japanese Yen faces challenges as central bank experts anticipate interest rate hikes in the Bank of Japan (BoJ) policy meeting this month.