Forex

USD/JPY Benefits from Central Bank Caution

Nikos Tzabouras Written by Nikos Tzabouras

USD/JPY Analysis

Prospects of further tightening this year by the Bank of Japan wither, against an unfavorable political backdrop ahead of the October 27 elections. The PM's remarks against further hikes and growing uncertainty around the result could further complicate the central bank's rate path. On the other side of the Pacific meanwhile, the Fed has become more reticent after September's jumbo 0.5% rate cut, as inflation shows persistence and the labor markets remains robust. Markets still expect another 50 bps of cuts this year in line with the Fed's projection, but odds of fewer moves rise.

This uncertainty around monetary policy works in favor of USD/JPY which enters its fourth straight profitable week and gains 5% this months, rebounding from the Q3 slump. The pair has regained the initiative, trying to take out the 152.00 handle, which would bring the 76.4% Fibonacci of the aforementioned drop in the spotlight.

Despite the Fed's more reserved commentary, most policymakers and markets still expect two more cuts this year. Even though the elections complicate the BoJ's path, policymakers see more hikes if the economy evolves as expected. As a result, we can see pushback at current levels and pressure towards the EMA200 (black line). Daily closes below it would pause the upside bias, but strong catalyst would be needed for that and current dynamics don't favor the downside.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.

As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.

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