FX.co ★ USD/JPY Analysis and Forecast

For the fourth consecutive day, the USD/JPY pair is steadily heading towards the psychological level of 150.00, currently trading above the 149.00 mark.

The Japanese yen continues to face pressure due to the Bank of Japan's decision last week to maintain the status quo. At the end of the September meeting, the Japanese central bank left its ultra-loose policy unchanged, refraining from any hints of possible changes in the near future.

Additionally, earlier this week, Bank of Japan Governor Kazuo Ueda stated that the current policy has a significant stimulative effect on the economy, and the main position is to patiently maintain monetary easing. He added that Japan's economy is at a critical stage in achieving a positive wage growth cycle and sustainable inflation at 2%, which is not yet visible. Such statements dispel hopes of a future exit from the massive stimulus program and continue to undermine the yen.

On the other hand, the Federal Reserve has indicated that interest rates will not be falling in the near future. It openly stated that there will be further rate hikes by the end of the year, with only two rate cuts expected in 2024, instead of the previously speculated four, as anticipated three months ago.

Many FOMC members still express uncertainty about the end of the fight against inflation. Consequently, this supports the prospects for further tightening of monetary policy. This, in turn, led to selling in the U.S. bond market and pushed the yield on 10-year Treasury bonds to the highest level since 2007, which became a key factor in the recent rise of the U.S. dollar to a 10-month peak and continues to support the USD/JPY pair's upward trajectory.

Nevertheless, the prevailing risk-off environment favors the relative status of JPY as a safe haven and limits the potential for spot price growth. But it should not be forgotten that Japanese authorities will intervene in the currency market to support the national currency. This restrains bulls from pushing USD/JPY to new levels.

In fact, Japanese Finance Minister Shunichi Suzuki issued a new warning against the recent weakness of the yen and stated last week that the government would not rule out any options to address excessive volatility in the currency markets. This, in turn, requires caution before taking positions regarding the continuation of the established upward trend observed since mid-July.

However, for now, the fundamental backdrop supports the pair's growth. But it is worth paying attention to today's news regarding the dollar before rushing into betting on further moves.