The USD/JPY pair efforts to find a firm direction and is stuck in a range below the 145.00 mark.

Oct 4, 2022
VOT Research Desk

Key Insights and Analysis

On Tuesday, USD/JPY made small gains, but there was no follow-through and it remained below 145.00.

The risk-on mood, policy divergence between the Fed and BoJ, and support for the safe-haven JPY undermine it.

The USD is still being weighed down by falling yields on US bonds, which prevents the pair from making significant gains.

Through the first half of the European session, the USD/JPY pair extended its consolidation price move on Tuesday and remained contained in a trading range of one week, below the psychological 145.00 mark.

The safe-haven Japanese yen is undermined by a significant difference in monetary policy stance between the Bank of Japan and other major central banks and the risk-on impulse.The USD/JPY pair benefits from this, in turn.

However, bulls are being prevented from making risky bets and limiting the upside, at least for the time being, by a number of factors.

If the yen moves too much, Japan’s Finance Minister Shunichi Suzuki said on Monday that the country is ready to take decisive action in the foreign exchange market. This, in addition to the widespread selling bias toward the US dollar and the narrowing of the US-Japan rate differential, keeps any significant gains for the USD/JPY pair from occurring.

The US Treasury bond yields have fallen below a multi-year high that was reached last week as a result of the Bank of England’s reaffirmation to buy up to £5 billion worth of long-dated gilts.The USD is forced to continue its sharp fall from a two-decade high as a result of this. However, prospects for the emergence of some USD dip-buying are bolstered by expectations of a more aggressive Fed policy tightening.

Markets have been pricing in another massive 75 basis points increase in November because they appear to be convinced that the Fed will continue to raise interest rates more quickly to control inflation. The USD bulls, on the other hand, wait for a new catalyst before betting. As a result, on Friday, the NFP report or closely watched US monthly employment details will be released.

The US economic docket, which includes JOLTS Job Openings and Factory Orders data later in the early North American session, will serve as a guide for traders on Tuesday. The USD demand will be driven by this, speeches by influential FOMC members, and the yields on USD bonds.In addition, the USD/JPY pair should benefit from the overall risk sentiment.

Technical levels

USD/JPY