USD/JPY has softened to approximately 158.25 during the early Asian session on Tuesday. In September, Japanese PPI inflation exhibited an unexpected decline. Fed’s Hammack indicated that rate hikes are a possibility. The USD/JPY pair experiences a decline, approaching 158.25 during the Asian trading hours on Tuesday. The Japanese Yen strengthens against the US Dollar despite softer Japanese Producer Price Index inflation data. Traders are vigilant regarding potential currency intervention by Japanese authorities aimed at supporting the JPY. Data released by the Statistics Bureau of Japan on Tuesday indicated that Japan’s wholesale prices increased by 6.8% year-on-year in September. This figure was slow from the previous month but indicates mounting inflationary pressure that keeps alive market expectations of a near-term interest rate hike. “Wholesale inflation will likely re-accelerate given strong uncertainty over the Middle East conflict, which is keeping crude oil prices elevated,” said Masato Koike. “But there’s no sign of inflationary pressure accelerating sharply for the time being,” heightening the chance that the BOJ will stand pat in October and wait until December to raise interest rates again, Masato added.
Cleveland Federal Reserve President Beth Hammack stated on Monday that the US central bank ought to transition “relatively quickly” to a restrictive monetary policy stance to manage inflation effectively. Hammack also advocated for both prompt and incremental adjustments to rates. According to CME FedWatch, traders assign a probability of over 80.6% to rates remaining unchanged at the next meeting, while the likelihood of an increase at the final meeting of the year in December stands at nearly 84.7%. Traders prepare for the crucial US inflation reports scheduled for later this week, seeking new momentum. The US Consumer Price Index inflation report is scheduled for release on Wednesday, with the Producer Price Index and Retail Sales data to follow on Thursday. These reports may offer additional guidance regarding the trajectory of the Federal Reserve’s policy. Strategists at UOB Group maintain their short-term range-trading stance on USD/JPY, noting that since early October they have been “tracking our range-trading view in USD” as price action has remained contained.
Recalling their latest update on Friday, 09 Oct, when spot was at 158.05, they highlighted that “we continue to expect USD to trade in a range, but a narrower 157.00/158.70 range is likely to contain price movements for now.” UOB adds that this 1–3 week view “remains unchanged,” with the Dollar expected to stay capped within that band in the near term. Fed’s Hammack delivers a notably more hawkish tone, with the 8.4/10 FXS Speechtracker score standing above the 7.5/10 historical average and underscoring a stronger bias toward tighter policy. The emphasis on the necessity for elevated interest rates, widespread and enduring inflationary pressures, and the danger of a deeply rooted inflationary mindset, coupled with a tendency for relatively swift, smaller rate adjustments, indicates a distinct preference for sustaining or amplifying restrictiveness. This is evident even while recognising neutral financial conditions and a mid-to-high 2% trend inflation that is gradually approaching the target. Hammack’s emphasis on demand-side pressures, particularly AI-driven demand that is “not self-correcting,” along with firms intending to raise prices beyond mere cost increases, underscores the argument that the Fed ought to adopt a more stringent policy stance to re-anchor inflation expectations. The FXS Fed Sentiment Index increases by 0.59 points to 138.92, affirming a significant shift further into hawkish territory, well above the neutral threshold of 100.
This uptick, in tandem with the elevated FXS Speechtracker score, signals that Fed communication is skewing more decisively toward sustained tight monetary policy, a backdrop typically supportive of the Dollar against lower-yielding peers. In the daily chart, USD/JPY remains positioned beneath the 100-day Simple Moving Average, which constrains the overall sentiment despite the recent recovery. Price remains above the 20-day Bollinger middle band, indicating near-term support, while the Relative Strength Index (14) around 54 suggests mildly constructive momentum that has yet to surpass the existing overhead resistance. On the topside, initial resistance is observed at the 20-day Bollinger upper band near 159.10, followed by the more substantial 100-day SMA at 159.50, which must be reclaimed to alleviate downside pressure. On the downside, immediate support emerges at the 20-day Bollinger middle band at 157.65, followed by the lower band around 156.25. A break below this level would likely reinforce the bearish bias and expose deeper losses.
