USD/JPY is experiencing slight upward movement, hovering around 157.40 during the early hours of Tuesday’s Asian session. Japan’s Katayama concurred with Bessent regarding the enhancement of cooperation during discussions held over the phone on September 25. Markets have assigned a probability of approximately 70.3% to the likelihood of a 25 basis points rate increase from the Federal Reserve during the October meeting. The USD/JPY pair exhibits slight upward movement, trading near 157.40 during the Asian trading session on Tuesday. Traders remain vigilant regarding potential currency intervention following the reaffirmation by US Treasury Secretary Scott Bessent and Japan’s Finance Minister Satsuki Katayama of their commitment to enhance cooperation in response to the weakness of the Japanese Yen. Katayama stated on Tuesday that she considers the undervalued Japanese Yen to be a concern, while expressing her agreement with Bessent regarding the need to enhance cooperation when questioned about their phone discussions last Friday. She added that officials will maintain close communications with the US Treasury to ensure orderly foreign exchange markets.
Japan’s leading currency diplomat, Atsushi Mimura, articulated on Monday that market participants ought to interpret the “very clear” communication from Tokyo and Washington regarding their apprehensions about the depreciation of the JPY. “Japanese officials can’t have it both ways: they can’t have this war in Iran that is driving up oil prices and US yields and then try to cap dollar-yen. In my work, I see the dollar-yen being driven by rising US interest rates. I think that’s the sort of tug of war between verbal intervention by Japanese officials claiming US support and rising US yields,” said Marc Chandler. On the US’s front, hawkish signals from the US Federal Reserve policymakers provide some support to the Greenback. Markets are assigning a 70.3% probability to a quarter-point rate hike from the Fed at the upcoming October meeting, as indicated by the CME’s FedWatch tool, following the central bank’s interest rate increase during the September meeting. Traders are nearly fully incorporating expectations for four quarter-point increases over the upcoming year.
Analysts emphasise that the recent policy action by the Bank of Japan has not succeeded in curbing the depreciation of the currency, pointing out that “the Bank of Japan announced its decision to hike the overnight policy rate by 25bp to 1.25%, but JPY has continued its weakening trend with USD/JPY up 2.82% from recent lows to 157.26.” This highlights that, despite stricter policy measures, the Yen continues to face persistent downward pressure against the Dollar. In the daily chart, USD/JPY remains positioned beneath the 100-day simple moving average and the upper Bollinger Band, which constrains the overall sentiment despite the recent recovery from July’s lows. Price is positioned above the Bollinger middle band at 156.16.
The 14-period Relative Strength Index, hovering around 50, indicates neutral momentum following a recovery from oversold conditions. This suggests a phase of consolidation within a broader bearish context, characterised by limitations on the upside. On the downside, initial support appears at the Bollinger middle band at 156.15, followed by the lower Bollinger Band around 152.85, where a more significant decline would encounter stronger demand. On the topside, immediate resistance is positioned at the upper Bollinger Band near 159.50, succeeded by the 100-day SMA at 159.55. Buyers must decisively reclaim this clustered barrier to alter the near-term bias from the prevailing bearish containment.
