The USD/JPY pair is regaining its positive momentum and, last week, approached a multi-week high once again.
On Friday, Bank of Japan Governor Kazuo Ueda confirmed that the central bank will aim to achieve the 2% inflation target, accompanied by wage growth, while maintaining the current accommodative policy. This indicates a significant divergence compared to the hawkish outlook of the Federal Reserve. The Fed's policy is considered a key factor in the relative weakness of the Japanese yen, providing tailwinds for the USD/JPY pair.
Additionally, last Thursday, Federal Reserve Chairman Jerome Powell stated that the recent surge in yields had tightened financial conditions, reducing the need for further actions by the central bank. However, Powell also noted that inflation is still too high, and monetary policy is not overly tight. This could be seen as a hint of another interest rate hike by the end of the year. This statement boosted the dollar and supported the USD/JPY pair's upward movement, but there is still some lack of bullish confidence.
Market participants anticipate that the Fed will maintain the status quo for the second consecutive time in November. This leads to a moderate decrease in U.S. Treasury bond yields and keeps dollar bulls from being too aggressive.
Meanwhile, traders remain concerned about the potential intervention by the Bank of Japan in the battle against the sustained depreciation of the yen. Economic data from Japan released today were not all positive.
The mentioned fundamental backdrop requires some caution before preparing for further bullish movement. Today, during the American session, news on America will be released, including the Business Activity Index in the service sector. If these reports favor the dollar, there is a chance for the pair to break above the 150 level.
