On the first day of the new week, the USD/JPY pair opened with a large adverse gap of 85 pips and has remained depressed below the 147.00 level through the first half of the Asian session. Spot prices, however, manage to defend the 200-hour Simple Moving Average (SMA) support, presently pegged around the 146.65 region, which should now act as a pivotal point for intraday traders.

In response to Bank of Japan (BoJ) Governor Kazuo Ueda's hawkish comments over the weekend signalling potential interest rate hikes, the Japanese Yen (JPY) appreciates, which weighs on the USD/JPY pair. Saturday's Yomiuri newspaper reported that Ueda said the central bank could end its negative interest rate policy when the 2% inflation objective is near. Ueda, however, reaffirmed that the BoJ will maintain its ultraloose monetary policy until it is confident that inflation will sustainably remain at or below 2%, supported by robust demand and wage growth.

In contrast, the Federal Reserve (Fed) is anticipated to raise rates by an additional 25 basis points by the end of the year and maintain higher rates for an extended period of time. The Wall Street Journal reported that some officials still prefer to err on the side of raising interest rates too much, with the rationale that they can reduce them later. The outlook remains favourable for elevated US Treasury bond yields, which helps limit a modest US Dollar (USD) pullback from its highest level since March 8 reached last week and functions as a tailwind for the USD/JPY pair, at least for the time being.

In the absence of any market-moving economic releases on Monday, it is prudent to wait for significant follow-through selling before concluding that spot prices have reached a short-term peak. Awaiting this week's important US macro releases – the latest consumer inflation figures on Wednesday, followed by the Producer Price Index (PPI) and Retail Sales data on Thursday – traders may opt to remain on the sidelines.

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