The USD/JPY pair dipped to 143.85 in Asian trading Monday, pressured by a softer US Dollar as traders ramp up bets on imminent Federal Reserve rate cuts. The movement comes ahead of speeches by Atlanta Fed President Raphael Bostic and Chicago Fed President Austan Goolsbee later today, events that could shape the near-term trajectory of the greenback.
Markets are now pricing in a 92.4% probability of a quarter-point rate cut, up sharply from 70% just a week earlier, according to the CME FedWatch tool. This shift follows the latest Personal Consumption Expenditures (PCE) Price Index, which rose by 2.3% YoY in May, aligning with expectations but signaling sticky inflation.
The core PCE index, excluding food and energy, also increased by 2.7%, suggesting that while inflation is cooling, it remains above the Fed’s long-term target, complicating the central bank’s policy path.
Technical Levels in Focus for USD/JPY
From a technical lens, USD/JPY struggled to break above the 200-period SMA near 144.80, turning that level into a resistance zone. Oscillators on the 4-hour and daily charts have begun showing negative momentum, increasing the likelihood of further downside below the 144.00 handle.
Key technical observations:
- A drop below 143.75 (overnight swing low) could open room for a slide towards the sub-143.00 region.
- If USD/JPY reclaims sustained strength above the 200-SMA and the 145.00 psychological level, it may retest 145.25-145.35 resistance.
- A decisive breakout above 146.00 could push the pair to 146.70-147.00 in the near term.
BoJ Stance and Geopolitical Risks Ahead
While US rate expectations drive the dollar’s weakness, the Bank of Japan’s cautious approach on rate hikes continues to weigh on the yen. Traders are eyeing the BoJ’s Q2 Tankan survey, due Tuesday, for fresh economic insights that could influence the central bank’s tightening path.
Geopolitical developments add to the complexity. The US and China are reportedly near a tariff deal, while President Trump’s abrupt halt in trade talks with Canada has added uncertainty. This mix of easing and renewed risks keeps markets cautious despite recent optimism.
In summary:
- Fed rate cut bets are increasing, weighing on the dollar.
- Technical signals point to downside risks for USD/JPY below 144.00.
- BoJ Tankan data and Fed speeches are critical for near-term direction.
Investors remain positioned for volatility as the interplay between US monetary policy, Japan’s cautious tightening, and global trade tensions shapes the next move in the USD/JPY pair.