The Japanese Yen (JPY) opened the week on a muted note, trading sideways against the US Dollar (USD) in the Asian session on Monday. Holiday-thinned liquidity due to Japan’s Mountain Day kept volumes low, while traders refrained from placing aggressive bets amid uncertainty over the Bank of Japan’s (BoJ) next rate hike timeline.
BoJ Caution Limits Japanese Yen Upside
At its July policy meeting, the BoJ revised up its inflation outlook and maintained the option for further rate hikes. However, last week’s Summary of Opinions revealed that policymakers remain concerned about the economic fallout from higher US tariffs and political uncertainty at home. This tempered expectations for immediate tightening, leaving JPY bulls hesitant.
Market participants are also weighing the impact of Japan’s upcoming Q2 GDP release on Thursday, which will help gauge the economy’s resilience and potential for further BoJ normalization.
Fed Dovish Tilt Weighs on USD
Meanwhile, the US Dollar faced selling pressure as traders built expectations for a September Fed rate cut, now priced at nearly 90% probability. Fed Governor Michelle Bowman’s dovish remarks over the weekend reinforced this view, as she highlighted weakening labor market conditions over inflation risks.
This divergence a cautious BoJ versus a more openly dovish Fed has capped USDJPY’s upside, keeping the pair below the 147.75–147.80 resistance zone.
Geopolitical Tensions Keep Traders Cautious
Market sentiment remains fragile ahead of the US tariff deadline on China, expiring Tuesday. Additionally, Friday’s scheduled meeting between US President Donald Trump and Russian leader Vladimir Putin in Alaska, with Ukraine on the agenda, is likely to stir geopolitical risk sentiment. This keeps safe-haven demand in play, though equities in Asia and US futures posted modest gains on Monday.
Market Awaits Key Data Triggers
Both the US CPI report on Tuesday and Japan’s preliminary Q2 GDP data on Thursday are set to shape the near-term USDJPY trend. These releases will determine whether the pair breaks out of its current consolidation phase or extends sideways trading.
Cautious Trading Amid Thin Liquidity
With Japan observing Mountain Day, reduced market participation has kept USDJPY movements subdued. Low liquidity often amplifies volatility once major data hits, making the upcoming week potentially more reactive.
Technical Outlook: 147.80 Caps Upside
From a technical perspective, immediate resistance is at 147.80, a break above which could open the way toward 148.20 and then 148.65. On the downside, initial support lies at 147.20, followed by 146.80. The daily chart shows the pair trading near its 50-day moving average, with momentum indicators signaling indecision consistent with the fundamental backdrop.
Conclusion
The USDJPY remains trapped in a narrow range as traders await high-impact data US CPI on Tuesday and Japan GDP on Thursday to provide clearer directional cues. While BoJ caution is limiting Yen strength, dovish Fed expectations are equally capping USD upside, suggesting consolidation may persist in the near term.
