USD/JPY Consolidates In a Range Near 150.00, Supported By Moderate USD Strength

Tuesday during the Asian session, the USD/JPY pair struggles to capitalise on the previous day's positive movement and oscillates between modest gains and losses. At present, spot prices are hovering just above the psychological 150.00 threshold and are supported by subsequent purchases of US Dollars (USDs).

The appreciation of the USD may have been caused by repositioning trade in anticipation of speeches delivered by influential FOMC members, such as Federal Reserve (Fed) Chair Jerome Powell, which could offer new insights into the trajectory of future rate hikes. Investors appear certain that the policy-tightening campaign initiated by the US central bank is coming to a close, and that rate cuts could commence in June 2024. The weaker-than-anticipated US employment report released on Friday dampened the fears, but overnight remarks by Fed officials provided contradictory indications regarding the next policy move.

Indeed, as stated by Fed Governor Lisa Cook, the current target interest rate established by the central bank is sufficient to restore inflation to the 2% objective set by the Fed. Cook continued by stating that continued vigilance will be maintained to ensure the inflation target is met. President of the Federal Reserve Bank of Minneapolis Neel Kashkari stated that the US economy has proven to be exceptionally resilient and that undertightening will not return us to 2% within a reasonable time frame. As a consequence, US Treasury bond yields experienced a modest upturn, which is perceived as providing an impetus for the US dollar and the USD/JPY pair.

However, the Bank of Japan's (BoJ) adoption of a more dovish posture undermines the Japanese Yen (JPY). Governor Kazuo Ueda of the Bank of Japan stated on Monday that although progress towards the 2% inflation target is encouraging, it is still insufficient to warrant the cessation of ultra-loose monetary policy. This further undermines JPY in light of the BoJ's last week's marginal adjustment to its yield curve control (YCC) policy, which indicated a sluggish departure from accommodative monetary policy settings spanning a decade.

In the aftermath of rumours that Japanese authorities will intervene in the FX market to halt a sustained depreciation of the domestic currency, the USD/JPY pair appears to have limited upside potential. As a result, ardent bullish traders should exercise caution when positioning for any significant intraday appreciating movement. When there is a lack of significant economic data from the United States that could move the market, remarks made by Federal Reserve officials will have a critical impact on the USD price dynamics and offer substantial support to the major.