USD/JPY Price Analysis: Powell’s Remarks Trigger Rebound

• Fed Chairman Powell has indicated that the central bank will hold on to 25bp interest rate cuts.

• Traders cut the likelihood of a rate cut in November by 50 bps from 53.3% to 35.4%.

• Economists expect a slight improvement in US job growth.

USD/JPY price analysis shows a rebound from recent lows after Powell’s remarks. Meanwhile, the yen was licking its wounds after the minutes of the Bank of Japan meeting showed caution on near-term interest rate hikes.

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On Monday, Fed Chairman Powell struck a dovish tone, noting that the central bank would stick to 25 bps rate cuts going forward. At the last meeting, the Fed cut borrowing costs by an unexpected 50 basis points. After that, market participants priced in a more than 50% chance of another significant rate cut.

However, after Powell’s speech, traders cut the likelihood of a 50 bps rate cut in November from 53.3% to 35.4%. As a result, the dollar rose, pushing the USD/JPY pair higher. This week, the US will issue several high-impact reports shaping the outlook for rate cuts. Most significant is the US non-farm payrolls report.

Economists expect a slight improvement in job growth, with the unemployment rate at 4.2%. If the numbers beat forecasts, rate cut bets will fall further, boosting the dollar. On the other hand, if the labor market deteriorates, markets will increase the likelihood of another massive rate cut.

Meanwhile, the yen gave up its election gains as policymakers appeared cautious on BoJ minutes. Most officials urged patience as market turmoil clouded the outlook. At the same time, the Fed’s recent interest rate cut raised fears about the US economy.

Key USD/JPY Events Today

• US ISM Manufacturing PMI
• US JOLTS job offers

USD/JPY Price Technical Analysis: Struggle around 30-SMA

Technically, the USD/JPY price broke above the 30-SMA after finding support at the 1.1100 level. Meanwhile, the RSI is trading slightly above 50, favoring bullish momentum. The previous uptrend stopped at the 1.1200 resistance level, where the bears made a engulfing candle that broke below the SMA.

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However, they failed to sustain the move lower, leading to a pullback. USD/JPY could strengthen if price stays between 1.1200 resistance and 1.1100 support. However, if the uptrend strengthens, the price could break above 1.1200 to make a new high.

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