USDJPY – 5 Minute Chart – 311025 – Retail Sales
Today’s economic indicators signaled a potential pickup in economic momentum and rising national inflation, supporting a more hawkish BoJ rate path. Given these dynamics, USD/JPY maintains a bearish bias despite Powell downplaying the odds of a December rate cut. However, traders should closely monitor comments from Prime Minister Sanae Takaichi, an advocate for ultra-loose monetary policy.
Fed Speakers and Capitol Hill in Focus
While Japanese data may fuel speculation about a BoJ rate hike, the continued US government shutdown will likely delay key economic reports. In the absence of September’s Personal Income and Outlays Report, traders should closely monitor Fed speeches.
FOMC members Lorie Logan and Beth Hammack, along with Fed Reserve Bank of Atlanta President Raphael Bostic, are due to deliver speeches later in the Friday session. Economists consider the three regional bank presidents relatively hawkish, suggesting they may argue against a December rate cut.
Calls to delay a December Fed rate cut would reinforce Powell’s stance and may sustain US dollar strength. While short-term dollar strength could lift USD/JPY toward 154.45, the broader outlook remains bearish amid BoJ policy normalization.
According to the CME FedWatch Tool, the chances of a 25-basis-point cut in December fell from 91.1% on October 23 to 66.6% on October 29. This sharp repricing followed Powell’s press conference.
USD/JPY Scenarios: Monetary Policy Divergence
Bearish USD/JPY Scenario: hawkish BoJ rhetoric and dovish Fed commentary could push USD/JPY toward the 153 level.
Bullish USD/JPY Scenario: dovish BoJ comments and hawkish Fed chatter could send USD/JPY toward 155.
AloJapan.com