- USD/JPY is seen consolidating its recent gains registered over the past three days.
- The divergent Fed-BoJ policy stance should continue to lend support to the major.
- Any corrective decline could be seen as a buying opportunity and remain limited.
The USD/JPY pair struggles to capitalize on its gains registered over the past three days and oscillates in a narrow trading band, just above mid-157.00s during the Asian session on Tuesday. Spot prices, however, remain well within striking distance of the highest level since late April touched last Friday and seem poised to prolong the recent well-established uptrend.
Despite the Federal Reserve's (Fed) hawkish stance, the markets have been pricing in the possibility of two interest rate cuts this year amid signs of easing inflationary pressures in the United States (US). This keeps the US Dollar (USD) bulls on the defensive for the second straight day and turns out to be a key factor acting as a headwind for the USD/JPY pair. Moreover, speculations that Japanese authorities might intervene to prop up the Japanese Yen (JPY) further contribute to capping the currency pair.
Meanwhile, Fed officials continue to argue in favor of one interest rate cut in 2024. In fact, Philadelphia Fed President Patrick Harker said on Monday that keeping rates where they are for a bit longer will help get inflation down and mitigate upside risks. This remains supportive of elevated US Treasury bond yields and might limit the USD losses. Furthermore, the Bank of Japan's (BoJ) cautious policy approach should cap any meaningful JPY appreciating move and lend some support to the USD/JPY pair.
The aforementioned fundamental backdrop seems tilted firmly in favor of bulls and suggests that the path of least resistance for spot prices remains to the upside. Hence, a corrective decline might still be seen as a buying opportunity as traders now look to the US macro data – monthly Retail Sales and Industrial Production figures. This, along with speeches by influential FOMC members, should provide some impetus to the USD/JPY pair ahead of the BoJ policy meeting minutes on Wednesday.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.