USD/JPY consolidates below 145.00, awaits fresh catalyst before next move higher

• USD/JPY is struggling to gain significant traction and remains trapped in a tight range.
• The fall seems cushioned by the divergence between the monetary policies of the Fed and the BoJ, and by the modest strength of the dollar.
• Investors now await Friday’s US NFP report before opening aggressive directional positions.

The pair USD/JPY it is struggling to take advantage of the previous day’s bounce from the 143.50 area, a 1.5-week low, and is oscillating in a tight range on Thursday. The pair remains below the psychological level of 145.00 during the first half of the European session, although the bias seems to continue to lean in favor of the bulls.

A wide divergence in the policy stance adopted by the Bank of Japan and other central banks important could continue to weigh on the Japanese yen. In fact, the Japanese central bank has lagged behind other major central banks in the process of normalizing its policy and remains committed to continuing its monetary easing. This, along with the appearance of some purchases around the dollarsupports the prospects for a significant rise in the USD/JPY pair.

Recent statements by several Fed officials reaffirmed expectations that the US central bank will tighten monetary policy at a faster pace and continues to act as a tailwind for the dollar. Indeed, markets have been pricing in the possibility of another 75 basis point Fed rate hike in November. This continues to support elevated US Treasury yields, widening the US-Japan rate spread and adding credence to the constructive outlook.

However, the Japanese finance minister, Shunichi Suzuki said on Monday that the government is willing to intervene in foreign exchange markets to prevent deeper losses in the national currency.. This is seen as a key factor preventing traders from opening aggressively bullish positions around the USD/JPY pair. Investors also seem reluctant and could expect a new catalyst in the monthly US employment data, popularly known as the NFP report on Friday.

Meanwhile, the release of weekly jobless claims, speeches from FOMC officials and US bond yields will boost dollar demand. In addition to this, traders will take cues from the broader market risk sentiment which could influence the JPY safe haven and produce short-term opportunities around the USD/JPY pair.

USD/JPY technical levels