At today's meeting, the Federal Reserve lowered the federal funds rate by 25 basis points to a range of 3.50%–3.75%, and simultaneously announced the resumption of technical purchases of short-term Treasury securities to manage year-end liquidity. Following this, the Fed's statement and dot plot generally conveyed a message of "rate cuts proceeding cautiously, with possible pauses in the future." As a result, the market initially sold off the dollar in the short term, but quickly began to digest the implication that "this rate cut does not signal long-term easing." Consequently, USD/JPY showed an initial dip followed by stabilization and even a renewed upside push. The impact of this decision is not one-dimensional. While the 25-basis-point rate cut did reduce the immediate yield advantage of the dollar on a nominal level, more importantly, the Fed did not commit to further rapid cuts in its statement or in the Chair's remarks. Moreover, the updated dot plot indicates that the tightening cycle has not come to a complete end. Therefore, markets have priced in the probability of "limited rate cuts and potential pause going forward." In other words, while short-term rates were lowered, medium- and short-term yields did not collapse. After an initial pullback, the dollar may find support due to a "slower-than-expected pace of rate cuts."  

Meanwhile, Japan's interest rate policy has not responded in kind—if the Bank of Japan maintains a relatively accommodative stance and the yield differential between Japanese and U.S. bonds remains intact, the fundamental bullish logic for USD/JPY stays valid. Additionally, the Fed's move to resume purchases of short-term Treasuries helps ease technical tensions in money markets, which can suppress extreme volatility toward year-end and provide a practical window for initiating long positions on pullbacks.  

Based on the daily chart, USD/JPY has shown a clear uptrend recently. Despite yesterday's bearish close, as of the European session today, the exchange rate is still oscillating around the 23.6% Fibonacci retracement level at 155.91. If today's closing price holds above 155.91, the likelihood of USD/JPY continuing its earlier uptrend will increase significantly.

Simultaneously, a long lower shadow bullish candle has formed on the 4-hour chart, creating a bullish engulfing pattern, further reinforcing the pair's upward momentum. 

Trading direction: Buy

Entry price: 156.00

Target price: 160.10

Stop loss: 155.40

Valid Until: December 25, 2025, 23:00:00

Support: 155.48/154.34

Resistance: 157.89/160.00