The Japanese Yen (JPY) extended its Bank of Japan (BoJ) Minutes-inspired rebound in Asian trade on Thursday but lacked conviction, holding near a three-week low against the US Dollar (USD). While investors see scope for further BoJ tightening this year, political uncertainty at home and economic headwinds from US tariffs continue to cloud the outlook, limiting upside in the currency.
BoJ minutes support rate-hike bets, but risks remain
Minutes from the BoJ’s July policy meeting showed board members advocating for resuming interest rate hikes, arguing that inflation risks and a firmer economy justify normalization. The release lifted the yen modestly, even as Japan’s Services PPI eased to 2.7% year-on-year in August from 2.9% in July.
However, markets remain wary of potential delays to policy tightening ahead of Japan’s ruling Liberal Democratic Party (LDP) leadership election on October 4. A dovish outcome could shift expectations and restrain JPY bulls, especially as investors weigh the economic impact of higher US tariffs.
Fed caution keeps USD gains in check
Across the Pacific, the Fed has penciled in two additional rate cuts by year-end following its 25-basis-point move earlier this month. Still, Fed Chair Jerome Powell reiterated caution, warning that cutting too aggressively could leave inflation unresolved and force policy reversal. His comments capped the dollar’s momentum, even as USD/JPY consolidated near a two-week high.
Traders now turn to a busy US data docket, including final Q2 GDP, Weekly Jobless Claims, and Durable Goods Orders, ahead of Friday’s key inflation reports: Tokyo CPI and the US Personal Consumption Expenditure (PCE) Price Index – the Fed’s preferred gauge.
Technical outlook: USD/JPY eyes 150.00 after 200-day SMA break
USD/JPY closed above its 200-day Simple Moving Average (SMA) for the first time since July 31, reinforcing bullish momentum. Daily oscillators continue to build positive traction, suggesting upside remains the path of least resistance. A push beyond 149.15, the monthly peak, could pave the way toward 150.00, with scope to extend gains to 150.55–150.60 and 151.00.
On the downside, the 200-day SMA around 148.50 now acts as initial support. A sustained drop below 148.00 would risk shifting sentiment and expose the 147.20–147.00 zone. A decisive break lower could negate the bullish bias and open the way toward 146.40, then 146.00, with deeper losses targeting the 145.50–145.45 area.
