USD/JPY remains range-bound: Markets await fresh signals

USD/JPY steadied around 159.31 on Thursday, remaining in a narrow range. Investors continue to assess the outlook for Bank of Japan monetary policy.

Markets are now pricing in approximately an 87% probability of a 25-basis-point BoJ rate hike in September, which would bring the rate to 1.25%. Before the July meeting, this probability stood at around 23%.

Earlier this week, former BoJ board member Seiji Adachi stated that the central bank is likely to raise rates as early as next month and could follow with another hike in January. According to him, keeping rates unchanged could reignite yen selling and accelerate imported inflation.

Market attention is now focused on today’s speech by BoJ Deputy Governor Ryozo Himino, with investors looking for fresh signals on the timing of the next rate hike.

It has also been confirmed that BoJ Governor Kazuo Ueda will not attend the Fed’s Jackson Hole Economic Symposium due to scheduling difficulties.

Technical analysis

On the H4 USD/JPY chart, the market is forming a consolidation range around the 158.88 level, currently extending between 158.40 and 159.48. An upside breakout would open the way for a move higher towards 161.20, while a downside breakout would open the way for a correction towards 158.58. The MACD indicator supports this scenario, with its signal line above zero and trending upward.

On the H1 chart, USD/JPY has completed an upward move to 159.48, followed by a correction to 158.88. The pair is currently moving higher towards 159.60. A breakout above this level would open the way for further gains towards 161.20. The Stochastic oscillator confirms this scenario, with its signal line above 50 and trending upward towards 80, indicating continued short-term upside momentum.

Conclusion

USD/JPY remains range-bound as markets await fresh catalysts, with attention focused on BoJ Deputy Governor Himino’s speech for signals on the timing of the next rate hike. Markets have sharply increased their expectations for a September hike, with the implied probability rising from 23% to 87%, supported by hawkish commentary from former board member Adachi. However, Governor Ueda’s absence from Jackson Hole means markets will not receive direct guidance from him at the symposium. Technically, a break above 159.60 could open the way for further gains towards 161.20, while the H4 structure also leaves scope for a correction towards 158.58 in the event of a downside breakout. The near-term direction will depend on BoJ signals and US economic data, with intervention risks remaining a key wildcard.