USD/JPY extends its recovery towards 151.00, attentive to Fed Powell’s speech

• USD/JPY Rebounds Strong Amid Dollar Resistance Ahead of Powell’s Speech.
• The Fed’s Bowman believes a further increase in interest rates is necessary.
• A slowdown in wage growth in Japan could delay the Bank of Japan’s plans to abandon easy monetary policy.

The pair USD/JPY has risen above the immediate resistance of 150.70 and is expected to reclaim a two-week high near 151.50 amid US dollar strength. The pair is consistently adding gains as the appeal for the US Dollar has improved ahead of Federal Reserve (Fed) Chairman Jerome Powell’s speech.

S&P 500 futures added nominal gains in the European session, portraying a revival in market participants’ risk appetite. The Dollar Index (DXY) rises for the third consecutive session as Fed policymakers lean towards further tightening of monetary policy to ensure price stability. The 10-year US Treasury yield recovered and was close to 4.58%.

US Fed Governor Michelle Bowman said she was in favor of tightening policy further to ensure inflation returns to 2% in a timely manner. Bowman added that monetary policy appears restrictive and that the tightening of financial conditions has been contributed to by rising bond yields, which could be volatile in the future.

Although some Fed policymakers support further interest rate hikes, investors still hope the central bank has ended the interest rate hike as cracks have appeared in the U.S. labor market. The Manufacturing PMI remains below the 50.0 threshold and the Services PMI suffered a sharp drop in October.

As for the Japanese yen, the fall in real wages has diminished its attractiveness. Inflation-adjusted real wages fell 2.4% in September, which will likely increase pressure on already vulnerable consumer spending. Higher wage growth is a prerequisite for the Bank of Japan to abandon its expansionary policy.