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USD/JPY rebounds to 143.00 despite Japan's holiday, Fed and BOJ watchful
USD/JPY recovers intraday losses within the immediate trading range close to the 20-year high. On Monday, Japan commemorates Respect for the Aged Day, which has no effect on yields. Mixed emotions and a light calendar also limit intraday fluctuations. The Fed's vs the BOJ's differential can keep purchasers optimistic despite intervention rumors enticing short-term selling.
USD/JPY recovers from intraday low towards reclaiming 143.00 despite Japan's holiday on Monday limiting the currency pair's immediate movements. This week's monetary policy meeting of the US Federal Reserve (Fed) and the Bank of Japan (BoJ) is expected to have a significant impact on the price of gold (BOJ).
Despite the pessimistic closing of Wall Street's benchmarks, the S&P 500 Futures show modest increases, reflecting the sentiment.
The cause may be related to US President Biden's statement, "I'm more positive than I've been in a long time." The national leader also claimed that inflation will be brought under control. On the same line are the covid updates from China as it unlocks Dalian, a city in the province of Liaoning, while observing zero coronavirus cases in Beijing and one, as opposed to zero the day before, outside of Shanghai's quarantine zone.
However, the willingness of US President Biden to support Taiwan in the event that China strikes Taiwan and the hawkish expectations for the Fed appear to keep USD/JPY buyers optimistic ahead of the important monetary policy pronouncements. It should be observed, however, that the recent bull market appears to have been halted by the talk surrounding the BOJ's intervention.
Initial September Consumer Sentiment readings from the University of Michigan came in at 59.5, up from 58.6 the previous month but below market expectations of 60.0. With the stronger US statistics, the probability of a 75 basis point (bps) rate hike by the Federal Reserve increased to over 80%, or 82% at the time of publication, while the market's estimates of a complete one percentage point increase in the Fed rate jumped to 18%.
Given the Japanese holiday and the light economic calendar elsewhere, USD/JPY may experience a sluggish session. The Fed versus BOJ matchup will be crucial for pair traders to monitor this week. In addition to the announcements of interest rates, which are mostly priced in, the economic projections and statements of the different central bank chiefs are essential. If Fed Chair Powell disappoints US dollar bulls and the BOJ demonstrates a willingness to defend the yen through intervention, USD/JPY losses cannot be ruled out.
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