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USD/JPY oscillates at around 148.60 amidst dovish Fed remarks, risk-on impulse

  • USD/JPY experiences restrained gains, hindered by a notable drop in US Treasury bond yields.
  • Dovish undertones from Fed officials contrast with potential BoJ policy normalization, creating crosscurrents.
  • Anticipated inflation data and BoJ’s upcoming meeting poised to further dictate pair’s trajectory.

USD/JPY prints minimal gains on Tuesday after beginning the week on a lower note, weighed by the fall in US Treasury bond yields, which, continued but a risk-on impulse, is a headwind for the Japanese Yen (JPY), therefore the US Dollar (USD) remains bid. The major is trading at around 148.57 after hitting a daily low of 148.16.

Yen on the defensive amidst Wall Street gains, while dipping US Treasury yields cap USD/JPY upside

Wall Street is trading with solid gains, hence a headwind for safe-haven assets, mainly the Yen, which remains on the defensive as the Bank of Japan (BoJ) is set to extend its ultra-loose policy. Nevertheless, the USD/JPY rally was capped by the US Treasury bond yields plunge as the 10-year benchmark note sits at 4.632%, dropping 17 basis points since Monday.

the main driver in US bond yields has been dovish comments by US Federal Reserve (Fed) officials. Dallas Fed President Lorie Logan said that higher US bond yields “may mean there is less need to raise Fed rates further.” Echoing her comments was the new Fed Vice-Chair Philip Jefferson, saying he would “remain cognizant of the tightening in financial conditions through higher bond yields.” Since then, US bond yields have continued its downward direction, and inflation data to be revealed late in the week, could refrain officials from adopting a dovish stance.

Recently, Atlanta’s Fed President Raphael Bostic said inflation has improved considerably, adding, "I actually don't think we need to increase rates anymore.”

Meanwhile, the latest New York Fed poll showed that consumers expect inflation year from now to stay at 3.7%, exceeding August’s 3.6%, while for a three-year, they see prices at 3%, from the prior month’s 2.8%. Other data showed the US small business sentiment declining moderately blamed on high prices and labor shortages, the poll revealed.

On the Japanese front, the Bank of Japan (BoJ) is expected to raise tis 2023 core inflation forecasts to around 3%, at the upcoming meeting in October 30 and 31. The BoJ would also update their projections for 2024 and 2025, which if upward revised, could open the door towards policy normalization.

USD/JPY Price Analysis: Technical outlook

The daily chart portrays the pair as neutral-biased but slightly tilted to the downside, capped by the October 6 high at around 149.53, the latest cycle high, before reaching the 150.00 mark. For a bearish continuation, the pair must drop below the Kijun-Sen at 148.03, followed by the October 3 swing low of 147.27. Once those levels are cleared, the USD/JPY could test the 146.00 mark. Conversely, if buyers would like to regain control, they need to claim 149.00, so they could challenge 150.00.

USD/JPY

Overview
Today last price148.63
Today Daily Change0.13
Today Daily Change %0.09
Today daily open148.5
 
Trends
Daily SMA20148.51
Daily SMA50146.65
Daily SMA100143.84
Daily SMA200138.53
 
Levels
Previous Daily High149.33
Previous Daily Low148.44
Previous Weekly High150.16
Previous Weekly Low147.32
Previous Monthly High149.71
Previous Monthly Low144.44
Daily Fibonacci 38.2%148.78
Daily Fibonacci 61.8%148.99
Daily Pivot Point S1148.18
Daily Pivot Point S2147.87
Daily Pivot Point S3147.3
Daily Pivot Point R1149.07
Daily Pivot Point R2149.65
Daily Pivot Point R3149.96

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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