The pair runs a profitable month as markets come to terms with the prospect of prolonged restrictive stance by the Fed and more hikes. Although inflation is coming down, the economy is strong and the labor market tight, which may require more action by the Fed.
On Friday's speech at the Jackson Hole Symposium, Chair Powell remained non-committal and touted data-dependence. However, his message had a hawkish tilt, as he stressed that policymakers are "prepared to raise rates further if appropriate" . This furthered the hawkish market repricing, since CME's FedWatch Tool now assigns the highest probability to another 25 bps of hikes in November for the terminal rates to be reached.
The Bank of Japan is on the far dovish side of the policy spectrum, despite inflation running above its 2% for many months now, which creates pressure for normalization. The central bank made another step towards this direction last month by making its yield curve control (YCC) more flexible, but at the same time this moves allows it to sustain its ultra-loose stance. Speaking at Jackson Hole, governor Ueda reiterated his view that underlying inflation is "still below our target of 2%", which justifies the "monetary easing framework". 
The monetary policy differential remains stark and USD/JPY continues to hover at 2023 highs and at the levels that had sparked the FX intervention by Japanese authorities is September 2021 (dashed line). Interestingly enough, we haven't seen any verbal support for the Yen recently and this gives USD/JPY the opportunity to challenge 148.83, but we are cautious past that.
The pair shows signs of exhaustion and the risk of intervention (verbal or actual) is present in any case present at current levels, which may contain the upside and create pressure. Daily closes below the EMA200 (143.70) would be needed for the bullish bias to pause however, something that would require a strong catalyst.
Markets now await the US PCE inflation update on Thursday and the employment report a day later, which can determine the next leg of the move.
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. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
Retrieved 28 Aug 2023 https://www.federalreserve.gov/newsevents/speech/powell20230825a.htm
Retrieved 28 Aug 2023 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
Retrieved 03 Dec 2023 https://www.boj.or.jp/en/about/press/koen_2023/data/ko230828a1.pdf