- USD/JPY finds fresh sales amid sustained USD selling and retreating US bond yields.
- Risk appetite and policy divergence between the Fed and BoJ weigh on the JPY and offer some support to the pair.
- Investors are now awaiting the crucial US CPI report before positioning themselves for firm short-term direction.
The pair USD/JPY comes under renewed selling pressure on Tuesday and falls to a new daily low at the start of the European session. However, the pair has managed to find some support near the 142.00 level and has quickly recovered to the 142.25-142.30 area.
The US dollar remains under pressure close to the monthly low hit on Monday and turns out to be a key factor putting some downward pressure on the USD/JPY pair. A survey published by the Federal Reserve Bank of New York showed that consumer expectations for US inflation in the coming years fell sharply to their lowest level since October 2021. Aside from this, a modest decline in US Treasury yields weighed on the dollar.
Furthermore, speculations that Japanese authorities could intervene soon to stop the free fall of the Japanese yen they also contribute to the selling tone surrounding the USD/JPY pair. That said, a generally positive tone around equity markets weighs on the safe-haven JPY. This along with the wide divergence in the monetary policy stance adopted by the Bank of Japan and the Federal Reservehelps limit the pair’s decline, at least for now.
It is worth mentioning that the Bank of Japan has lagged behind other major central banks in the process of normalizing policy and remains committed to continuing its monetary easing. Instead, the Fed is expected to tighten policy at a faster pace to control inflation. Therefore, attention will continue to be focused on the US CPI consumer inflation figures for the month of August, which will be published early in the American session on Tuesday.
The crucial US CPI report will play a major role in influencing the Fed’s policy outlook and dictating the near-term path of the dollar. This, in turn, will help determine the next directional move for the USD/JPY pair. In the meantime, investors may refrain from opening aggressive positions, warranting some caution before positioning for any further intraday bearish moves ahead of the key data.
USD/JPY technical levels
Source: Fx Street
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