USD/JPY Holds Near 147.50 as BoJ Hawkish Tone Limits Dollar Upside

The USD/JPY pair edged higher in Monday’s Asian session, trading around 147.40, recovering slightly after a nearly 1% drop in the previous session. However, the upside remains capped as the Japanese Yen (JPY) gains support from hawkish comments by Bank of Japan (BoJ) Governor Kazuo Ueda.

BoJ Governor Ueda Signals Scope for Another Rate Hike

Speaking at the Jackson Hole Symposium over the weekend, Ueda expressed optimism that conditions for another rate increase were taking shape. He highlighted that wage growth was no longer limited to large corporations but had also spread to small and medium-sized enterprises, supported by a tightening labor market.

Meanwhile, fresh data from Japan showed core inflation slowing for a second consecutive month in July, yet still above the BoJ’s 2% target. The nationwide core Consumer Price Index (CPI) rose 3.1% year-on-year, slightly higher than the median forecast of 3.0%, reinforcing expectations that the BoJ could normalize policy further in the coming months.

Fed Policy Outlook and USD Pressure

The US Dollar (USD) is under pressure as traders price in growing odds of a Federal Reserve (Fed) interest rate cut in September. At Jackson Hole, Fed Chair Jerome Powell noted that risks to the labor market were rising, while also acknowledging that inflation remained a challenge. Powell emphasized that no decision had been finalized, but markets are already pricing in a high probability of easing.

According to the CME FedWatch tool, investors see nearly an 85% chance of a 25-basis-point cut next month, compared to over 90% earlier this month.

Technical View: Key Levels to Watch

From a technical perspective, USD/JPY is holding near 147.50, but upside momentum looks fragile.

Immediate resistance: 148.00 – a break above could open the way toward 149.00.
Support levels: Initial support lies near 147.00, followed by stronger demand at 146.20.
Sustained losses below 146.00 could tilt the outlook bearish in the near term.

Outlook

The broader bias for USD/JPY remains mixed as BoJ’s hawkish outlook contrasts with the Fed’s dovish tilt. Traders are likely to stay cautious ahead of upcoming global PMI data and Powell’s further remarks at Jackson Hole, which may set the tone for USD flows this week.

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Yasher Rizwan