- USD/JPY attracts buyers for the third straight day and draws support from a combination of factors.
- The BoJ policy uncertainty and a weak domestic economy continue to undermine the Japanese Yen.
- Reduced Fed rate cut bets lend support to the USD and contribute to the pair’s steady positive move.
The USD/JPY pair scales higher for the third straight day – also marking the fourth day of a positive move in the previous five – and climbs to over a one-week high, around the 157.25 area during the Asian session on Tuesday. Spot prices, however, remain below the 157.65-157.70 supply zone as traders seem reluctant ahead of this week's key US macro data and central bank event risks.
The US consumer inflation figures are due for release on Wednesday, which will be followed by the highly-anticipated FOMC monetary policy decision. Investors will look for cues about the likely timing when the Federal Reserve (Fed) will begin cutting interest rates. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the USD/JPY pair ahead of the Bank of Japan (BoJ) decision on Friday.
Market participants remain uncertain if the Japanese central bank will announce a reduction in the monthly government bond purchases amid a weaker economy. In fact, the Cabinet Office reported on Monday that contracted by 0.5% during the first quarter and by the 1.8% YoY rate. This, along with a stable performance around the equity markets, is seen undermining the Japanese Yen (JPY) and turning out to be a key factor acting as a tailwind for the USD/JPY pair.
The USD, on the other hand, stands tall near its highest level since May 14 touched on Monday and continues to draw support from growing acceptance that the Federal Reserve (Fed) might keep interest rates higher for longer. The expectations were fueled by the stronger-than-expected US jobs data released on Friday. This, in turn, favors the USD bulls and supports prospects for an extension of the USD/JPY pair's recent rise from the 50-day Simple Moving Average (SMA).
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