USD/JPY Pair in a Turbulent Momentum on Wednesday Ahead of US CPI

The USD/JPY pair experienced some purchasing near 145.15 and recorded a respectable comeback from the nearly two-week low it reached earlier this Wednesday. Early in the North American session, the intraday increase gained momentum and spurred renewed US Dollar demand, pushing spot prices to a new daily high closer to the mid-146.00s.

While the Federal Reserve’s chances of tightening policy more aggressively are fading, the markets are still pricing in at least a 50 basis point rate increase in December. This pushed the USD Index (DXY), which gauges the performance of the dollar against a basket of currencies, away from a multi-week low reached on Tuesday and maintained support for high US Treasury bond yields.

The Bank of Japan’s (BoJ) failure to raise interest rates thus far, on the other hand, has continued to weigh on the value of the Japanese yen (JPY). Additionally, the BoJ is still dedicated to maintaining the 10-year bond yield at 0%, which widens the rate difference between the US and Japan. This, in turn, strengthened the likelihood of further upward movement for the USD/JPY pair.

However, rumors that the Japanese government would step in once more to prevent a sharp decline in the yen could prevent any appreciable rise in market prices. In addition, a milder risk tone may provide additional support for the JPY safe haven and help limit gains for the USDJPY pair, at least temporarily.

Additionally, traders appear hesitant and could decide to hold off until the upcoming US consumer inflation data, which is scheduled for release on Thursday, provides a new catalyst. The Fed’s rate-hiking cycles, which in turn should decide the near-term trajectory for the dollar and the USDJPY pair, will be heavily influenced by the crucial US CPI report.

USD/JPY Traders to Draw Clues from FOMC Member Speeches

In the absence of pertinent market-moving economic reports on Wednesday, traders will instead draw their signals from statements made by prominent FOMC members. Aside from this, traders should be able to seize short-term chances in the USDJPY pair thanks to the US bond yields and the general market risk mood.