USD/JPY under pressure as Yen pares losses

The USD/JPY pair declined on Tuesday, touching 147.70. The move marks a partial recovery for the yen, enabling it to recoup some of its recent losses. Selling pressure on the US Dollar intensified after US President Donald Trump announced the removal of Federal Reserve Governor Lisa Cook over allegations of mortgage fraud. The decision has sparked fresh concerns regarding the central bank's independence and its ability to formulate policy without political interference.

On the domestic front, Bank of Japan Governor Kazuo Ueda stated that wage growth in Japan is expected to persist, supported by a tight labour market. He suggested that these conditions are laying the groundwork for a further interest rate hike. Although the central bank held its policy rate steady in July, it upgraded its inflation forecasts and delivered a more optimistic assessment of the economic outlook.

This week, investors are also awaiting the release of key Japanese economic data, including industrial production, retail sales, and consumer confidence.

Overall, sentiment towards the yen remains mixed, with the USD/JPY pair likely to remain range-bound in the near term.

Technical analysis: USD/JPY

Four-hour chart

The pair continues to trade within a consolidation range around 147.33. The current range extends between 146.55 and 148.76. A further decline towards the 146.14 support level is plausible. If reached, a new upward wave targeting 151.47 would be possible. This outlook is supported by the MACD indicator, with its signal line below zero and pointing sharply lower.

One-hour chart

The market has completed an upward wave structure to 147.92, followed by a downward leg to 147.00, effectively setting the boundaries of the current consolidation range. A breakout to the upside could see the pair extend its gains towards 148.40. Conversely, a break below support could open the way for a decline towards 146.14. This scenario is corroborated by the Stochastic oscillator, with its signal line below 50 and trending lower towards 20.

Conclusion

The pair is currently caught between fundamental pressures on the dollar and a cautiously hawkish, but data-dependent Bank of Japan. The technical picture suggests a key decision point is approaching, with a breakout of the current consolidation range likely to set the direction for the next significant move.