USDJPY D1 11-12
USD/JPY daily chart

The high in the last hour touched 146.45 as buyers are retracing further the drop from Thursday last week, which came after markets interpreted BOJ governor Ueda's remarks to signal an imminent policy shift. That also squeezed out USD/JPY longs, which I would argue is more of the main cause for the steep drop at the time. But now, we're seeing price recover following a notable bounce off the 200-day moving average (blue line) from last week.

There is also support from the 38.2 Fib retracement level of the swing higher for the majority of this year, seen at 142.47, that is helping out in terms of the technicals.

As for the fundamental outlook, I continue to maintain that those arguing for a shift in policy sentiment or wording by the BOJ this month might be setting themselves up for disappointment.

Policymakers have made it clear that they are going to wait on the spring wage negotiations next year before reacting and even then, I also continue to raise some questions on their appetite and willpower as noted here.

At the same time, we also have the Fed meeting this week to consider and in all likelihood, we should see Powell & co. brush aside talks of any early pivot towards cutting interest rates. Markets have already priced in a considerable amount of rate cuts for next year, with the Fed funds futures curve showing that the first rate cut priced in now is for May 2024. And in total, there are around 108 bps worth of rate cuts priced in for next year.

And that is already tapered down slightly after the US jobs report yesterday. Will we see more of the same after the Fed this week? Perhaps.

If so, USD/JPY could well be looking to challenge its 100-day moving average (red line) at 147.51 currently next.