USD/JPY has experienced a decline, trading at approximately 158.15 during the Asian session on Thursday. Comments from Ueda and Bessent reinforce the argument for a Bank of Japan rate increase this month. The labour market data for August in the United States is set to be the focal point later this week. The USD/JPY pair draws the attention of sellers around the 158.15 mark during the Asian trading session on Thursday. The Japanese Yen strengthens against the US Dollar following hints from Japanese policymakers that interest rates will rise later this month. The US August Nonfarm Payrolls report is set to take center stage later on Friday. The Bank of Japan governor Kazuo Ueda stated on Tuesday that the central bank will consider the possibility of raising interest rates, including in September, with particular attention to the potential increase in inflationary risks, suggesting a significant likelihood of a rate hike in September.
Treasury Secretary Scott Bessent indicated that he met with Ueda and emphasised the need for “decisive” monetary measures to address the weak JPY. Overnight index swaps are currently pricing in a complete 25 basis points rate hike at the BoJ’s September meeting. Pricing indicates a minimal probability of a 50 basis point adjustment. Traders are poised for the release of US labour market data this week, which includes the much-anticipated Non-Farm Payrolls and Unemployment Rate. This report may provide insights into the trajectory of US interest rates. Economists anticipate that the US economy will generate 58,000 jobs in August, with the Unemployment Rate expected to remain unchanged at 4.1% during this timeframe.
If the report indicates outcomes that exceed expectations, this may provide support for the USD relative to the JPY in the short term. Strategists note that recent BoJ commentary has subtly shifted market expectations around the pace and size of future tightening. They highlight that the remarks “hinted to the possibility of tightening in increments greater than the 25bpt adjustments typically delivered by central banks,” a move that would be “even less expected by the BoJ—given that it’s tightening out of negative rates and the zero lower bound have even favored 10-15bpt adjustments.” This evolving guidance underscores the potential for less conventional step sizes as Japan continues to normalize policy. In the daily chart, USD/JPY maintains a bearish near-term bias as the spot remains below the 100-day simple moving average and the 20-period middle band of the Bollinger Bands.
Price is positioned just slightly above the lower Bollinger band at 157.98, signifying that the pair is nearing the lower boundary of the recent range. Meanwhile, the Relative Strength Index (14) at approximately 38.9 indicates a lack of momentum following its exit from oversold territory. On the topside, initial resistance is situated at the Bollinger 20-period middle band around 159.18, followed by the 100-day SMA at 159.99 and the upper Bollinger band near 160.38, collectively establishing a substantial barrier for any recovery efforts. On the downside, immediate support is provided by the lower Bollinger band at 157.98; a decisive break below this level would open the door to further weakness, whereas holding above it could see USD/JPY consolidating while remaining constrained beneath the 159.00–160.00 resistance cluster.
