• The USD/JPY forecast remains bearish as the BOJ tilts closer to a rate hike.
• The risk of a US government shutdown and higher JGB yields support the bearish narrative in USD/JPY.
• Markets are now watching the JOLTS job opening data, along with key speeches, for further impetus.

The Japanese yen gained solid ground on Tuesday, pushing the USD/JPY price towards 148.00 handle as markets anticipate the Bank of Japan edging closer to a rate hike, with heightened political uncertainty in Washington threatening the delay of US data releases.

The BOJ’s September policy meeting revealed that board members were divided, but many reiterated the need for a rate hike sooner, from 0.50% to 0.75%. Rising wage growth and sticky inflation, along with a volatile government bond market, continue to pressure the central bank to act quickly. The 2-year JGB yields hit 0.935%, the highest level since 2008. Weak auction demand triggered speculation about a tighter BOJ policy.

The hawkish shift in BOJ stands in contrast with the US Fed, where markets are pricing in two more rate cuts by the end of 2025. The divergence is giving more strength to the USD/JPY sellers, especially after the growing risk of a US government shutdown. Any delay in the release of US data, such as the NFP, could further erode the dollar’s sentiment, with investors heavily relying on the JOLTs jobs opening data in the meantime.

Japan’s domestic data remains mixed, with retail sales showing the most significant decline since 2021, while industrial production fell for the second consecutive month. However, investors continue to ignore the signs of economic weakness, focusing mainly on the BOJ’s gradual retreat from ultra-loose monetary policy. The safe haven reinforces the narrative, with the yen gaining amid geopolitical tensions and US fiscal uncertainty.
 

USD/JPY Key Events Ahead:

The significant events due today include:

• US JOLTS job openings
• US CB Consumer Confidence

Meanwhile, President Trump’s speech, along with Fed member Goolsbee, can also provide impetus to the market.
 

USD/JPY Technical Forecast: Sellers Aiming for 200-MA
 

(Click on image to enlarge)

USD/JPY 4-hour chart
 

The 4-hour chart for the USD/JPY shows a growing bearish pressure as the price formed a top near 150.00 and fell below the 20-period MA. The price is now looking to test the confluence of 100- and 200-period MAs around 147.75. A sustained breakout of this level could initiate a deeper correction towards 147.00 and 146.500.

Alternatively, if the price manages to sustain above the 148.00 mark, it could try recapturing the 50-period MA at 148.40 ahead of the 20-period MA near 149.00.

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