During Thursday's Asian trading session, the Japanese yen's rebound against the US dollar encountered resistance, hovering near weekly lows. Investors remain uncertain about the timing and magnitude of potential Bank of Japan rate hikes, while domestic political instability has weakened the yen's safe-haven appeal.
BOJ Deputy Governor Ryozo Himino stated: "Global economic uncertainty remains high, and there is no urgent need for the central bank to raise the current low interest rates."
However, BOJ Governor Kazuo Ueda pointed out: "If economic and price trends align with the central bank's expectations, further rate increases remain a viable option."
Market bets on a potential BOJ rate hike before year-end are primarily based on strong wage growth, persistent inflation, and improving economic outlook. However, domestic political uncertainty has become a significant factor constraining the rebound.
The resignation announcement by ruling party Secretary-General Hiroshi Moriyama has sparked market concerns about the Kishida administration's fiscal policies, while pushing 30-year government bond yields above 3% to record highs.
In the United States, July JOLTS job openings fell to 7.18 million, below the expected 7.40 million, marking the lowest level since September 2024. This weak data reinforced market expectations for a Federal Reserve rate cut in September.
The CME FedWatch tool shows markets have priced in over 97% probability of a 25 basis point rate cut in September, with expectations of at least two additional cuts by year-end. This limits the dollar's appeal, thereby pressuring USD/JPY.
From a daily chart perspective, USD/JPY encountered resistance at the 200-day moving average (around 148.75-148.80) and pulled back from the 61.8% Fibonacci retracement level, indicating heavy overhead pressure. RSI and other oscillating indicators remain neutral with a slight bullish bias, suggesting room for further consolidation.
A break below 148.00 would open downside space toward 147.40-147.00, or even the 146.20-146.00 region. Should the pair stabilize above 148.30 and break through the 149.00 level, it could target the 150.00 psychological level and further challenge the August high of 151.00.
Market Analysis: Currently, USD/JPY is constrained by dual forces: Fed rate cut expectations weakening the dollar on one hand, while BOJ policy and political uncertainty undermining the yen on the other.
In the short term, the currency pair may continue oscillating within the 148.00-149.50 range, with the real breakout point depending on Friday's non-farm payrolls data. If non-farm payrolls significantly miss expectations, the dollar could face further selling pressure, potentially triggering a corrective rebound in the yen.