- USD/JPY aims to extend the rally to 150.00 as the BoJ continues to favor a dovish interest rate policy.
- Unlike global slowdown fears, the US economy is resilient due to falling inflation and upbeat labor market conditions.
- Investors await the US Durable Goods Orders data which is seen contracting at a slower pace of 0.4%.
The USD/JPY pair faces a less-confident resistance near 149.20 but is expected to resume its upside move toward the crucial resistance of 150.00. The asset has been capitalizing on dovish interest rate guidance from Bank of Japan (BoJ) Governor Kazuo Ueda and strong US Dollar amid a cautious market mood.
S&P500 futures posted significant losses in the London session as investors worried about the consequences of higher interest rates by the Federal Reserve (Fed), which is expected to remain elevated for a longer period.
The US Dollar Index (DXY) refreshes a 10-month high around 106.20 as Fed policymakers favored further tightening of monetary policy to ensure price stability. Unlike global slowdown fears, the US economy is resilient due to falling inflation and upbeat labor market conditions. While US inflation has been softening, robust consumer spending could trigger upside risks to inflation. This could encourage Fed policymakers to support one more interest rate hike.
Meanwhile, investors await the US Durable Goods Orders data for August. Orders are seen contracting at a slower pace of 0.4% against the 5.2% decline seen in July. The US manufacturing sector is already going through a vulnerable phase. The US Manufacturing PMI has been contracting for a long period and a weak new order book indicates that factory activity will remain in contraction.
On the Japanese Yen front, BoJ Ueda supports for extending the expansionary monetary policy as 2% inflation is not in sight. Kazuo Ueda cited that a moderate rise in inflation backed by wage growth would be a real victory for the central bank.
Japan Finance Min Suzuki said Japan is at a critical stage whether to spur consumption, wage growth; Reiterated excessive FX moves are not desirable, watching FX moves with a high sense of urgency.
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