The USD/JPY pair made some gains on Monday, but it has been struggling to maintain its upward momentum. Despite reaching the 148.00 mark in the Asian session, the pair has since dropped to a fresh daily low below the mid-147.00s. This indicates that there are significant challenges preventing the pair from capitalizing on its modest uptick.
One of the key factors limiting the USD/JPY pair’s gains is the divergent policy expectations between the Bank of Japan (BoJ) and the Federal Reserve (Fed). While the US central bank is expected to begin easing its monetary policy in September, the BoJ may be inclined to raise interest rates following a stronger second-quarter Gross Domestic Product (GDP) print. This difference in policy direction is keeping a lid on any significant upside for the currency pair.
The prevalent risk-on mood in the market, fueled by signs of easing fears of a recession in the US, has been undermining the safe-haven appeal of the Japanese Yen (JPY). As a result, the USD/JPY pair has received some support from a modest US Dollar (USD) uptick. However, geopolitical tensions in the Middle East are tempering the overall optimism in the market, which could impact the pair’s performance in the near term.
Looking Ahead
Investors are closely monitoring the upcoming events that could influence the USD/JPY pair’s direction. The release of the Federal Open Market Committee (FOMC) meeting minutes on Wednesday and Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium on Friday are expected to provide further insights into the Fed’s rate-cut path. These events could shape market expectations and potentially lead to a more decisive move for the currency pair. As investors weigh the evolving economic and geopolitical landscape, the USD/JPY pair remains under the spotlight, facing challenges despite some positive momentum.