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The USD/JPY Pair Oscillates Around 149.00, Just Below Tuesday's Yearly High
It is anticipated that USD/JPY will consolidate its recent gains to the highest level since October 2022. The minutes of the BoJ's policy meeting in July provide no meaningful impetus for the duo. The USD remains supported by the Fed's hawkish outlook, which continues to underpin the currency. Fears of government intervention prove to be the only factor preventing further gains.
The USD/JPY pair struggles to acquire traction on Wednesday and trades within a narrow range throughout the Asian session. Spot prices are currently near the 149.00 level, just below the greatest level since October 2022, which was reached on Tuesday, and move little in response to the minutes of the Bank of Japan (BoJ) policy meeting.
Policymakers concurred that the Bank of Japan (BoJ) must maintain current monetary easing in order to achieve the price objective in a stable and sustainable manner. While several members noted downside risks to Japan's economy, prices were largely influenced by overseas developments. This is in addition to remarks made by BoJ Governor Kazuo Ueda earlier this week, which reaffirmed that the central bank is more likely to maintain its ultra-loose monetary policy stance in the near future. In contrast, the Federal Reserve (Fed) signalled the possibility of at least one more rate increase before the end of the year, allowing the US Dollar (USD) to stand tall near the YTD high and acting as a tailwind for the USD/JPY pair.
As a result of persistent inflation in the United States, the US central bank reiterated last week that interest rates will remain elevated for longer. Moreover, investors are becoming increasingly wary of the inflationary implications of rising oil prices. In addition, the incoming robust US macro data bolsters the likelihood of additional Fed policy tightening. Meanwhile, the hawkish outlook continues to support elevated US Treasury bond yields, which continue to support the dollar and the USD/JPY pair. However, the upside is limited by rumours that the Japanese government will intervene on the foreign exchange market to support the domestic currency.
Traders appear reluctant to place aggressive wagers and would rather await Fed Chair Jerome Powell's Thursday speech. In addition, this week will see the publication of significant US macro data, including Durable Goods Orders on Wednesday, the final Q2 GDP reading on Thursday, and the Core PCE Price Index on Friday. In turn, this will have a significant impact on USD price dynamics and provide significant impetus for the USD/JPY pair. The aforementioned fundamental environment appears to strongly favour bullish traders, suggesting that the path of least resistance for spot prices will continue to be upward.
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