USD/JPY is expected to remain volatile this week ahead of the US and Japanese monetary policy announcements, with attention focused on its resilience around the lower 155-yen range and the struggle to move higher.
USD/JPY rose as high as ¥156.75 in New York trading on the 4th before plunging to ¥155.36. In Tokyo trading, this level is expected to provide downside support, with a rebound toward the lower ¥156 range anticipated. EUR/USD fell to around $1.1585 but subsequently recovered to around $1.1625 against a backdrop of lower long-term interest rates.
USD/JPY is expected to remain volatile this week ahead of the US and Japanese monetary policy announcements. A 0.25% rate hike at the Bank of Japan's September meeting is already priced in, making the focus whether there will be a large 0.50% hike or an additional rate hike at the December meeting. In the US, comments from senior Federal Reserve officials have suggested that interest rates may remain unchanged, and depending on those comments, the dollar could come under pressure.
Key factors to watch this week include the rising probability of a rate hike at the next FOMC meeting and the scheduled release of inflation data for September. With the New York market closed for Labor Day, trading is expected to become subdued at times as participation declines. Whether USD/JPY can avoid breaking below ¥155 is likely to serve as an indicator of the pair's downside resilience.