USD/JPY Consolidates in Familiar Rage, Holds Comfortably Above 147.00

• USD/JPY is extending its consolidated sideways price move in a week-old trading range.
• Uncertainty over a BoJ rate hike and a positive risk tone undermine the JPY, lending support.
• Bets on more Fed rate cuts keep USD bulls on the defensive and act as a headwind.

The USD/JPY pair is struggling to capitalize on the previous day’s good rebound from the round figure of 146.00 or the weekly low and is oscillating in a narrow trading band during the Asian session on Thursday. However, spot prices are holding comfortably above the 147.00 mark and remain capped in a week-old range as traders await fresh catalysts before positioning for firm near-term direction.

Uncertainty over when the Bank of Japan (BoJ) is likely to raise interest rates again is keeping traders from placing aggressive bets and driving price action in the USD/JPY pair. In fact, Japan’s central bank raised its key interest rate to about 0.25 percent, or the highest since 2008, at the end of its July policy meeting and outlined a plan to scale back its bond-buying program.

Adding to this, BoJ Governor Kazuo Ueda said the central bank will continue to raise interest rates and adjust the degree of easing if the current economic and price outlook is realized. The opinion was taken from the summary of views from the BoJ’s policy meeting in July. That said, BoJ Deputy Governor Shinichi Uchida downplayed the chances of a near-term rate hike amid recent volatility in financial markets.

Apart from that, a generally positive risk tone is undermining demand for the safe-haven JPY and continues to provide some support to the USD/JPY pair. However, the upside remains capped on bets for more interest rate cuts by the Federal Reserve (Fed), supported by signs of cooling US inflationary pressures, keeping USD bulls on the defensive and acting as a headwind.

Moving forward, investors are now looking forward to the US economic plan – which includes the release of monthly retail sales figures, the usual weekly initial jobless claims, the Empire State Manufacturing index and the Philly Fed Manufacturing index. Apart from this, US bond yields will lead the USD, which along with broader risk sentiment should provide some impetus to the USD/JPY pair.