On the first day of a new week, the USD/JPY pair attracts dip-buying and appears to have halted its retracement slide from the 150.75-150.80 region, or the highest level since October 2022 that was reached last week. In contrast, spot prices are presently fluctuating between 149.70 and 149.75, with a daily gain of less than 0.10%, as investors await pivotal central bank meetings prior to initiating new directional bets.

On Tuesday, the Bank of Japan (BoJ) is expected to release its decision in the midst of increasing speculation regarding a potential alteration in the yield curve control (YCC) policy. It is improbable, nonetheless, that the Japanese central bank would alter its negative policy rates. This represents a significant departure from the practises of other prominent central banks, such as the Federal Reserve (Fed), which, in conjunction with an optimistic risk stance, is perceived to weaken the safe-haven Japanese Yen (JPY) and ultimately serve as a crucial impetus for the USD/JPY pair.

In contrast, the US Dollar (USD) continues to benefit from elevated yields on US Treasury bonds, which are bolstered by optimistic expectations regarding the Federal Reserve. In the third quarter, the United States economy expanded at its fastest rate in nearly two years, according to data disclosed last week. In addition, the Commerce Department of the United States reported that September consumer expenditure increased beyond expectations, contributing to a higher monthly inflation rate. This demonstrated that the United States economy continues to maintain a stable foundation and lends credence to the possibility that the Federal Reserve will implement additional monetary tightening.

However, investors appear certain that the US central bank will uphold the status quo on Wednesday, following its conclusion of a two-day policy meeting, for the second consecutive time. As a consequence, USD bulls are being impeded from placing aggressive wagers. Moreover, as the USD/JPY approaches the key central bank event risks, speculations that Japanese authorities will intervene in the FX market to combat a sustained depreciation in the JPY further contribute to curbing the pair. However, the underlying fundamental environment appears to be in favour of bullish speculators.

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