The USD/JPY appears to be following the footsteps of the US Treasury yields as it retraces its decline after the release of the Federal Open Market Committee Minutes. Its exchange rate might continue to follow the positive 50-Day SMA (135.38) if it climbs above the moving average.
The separate tasks the Bank of Japan and the Federal Reserve follow might keep the currency pair positive. Chairman Jerome Powell and others expect the rate hikes to yield positive results and are prepared to continue their hawkish moves to promote price stability and maximize employment opportunities.
They are also on the move to increase Fed officials; this might increase the trajectory for US interest rates.
The central bank is slated to update the Summary of Economic Projections (SEP) at the next meeting, scheduled for September 21, the FOMC may change its method of combating inflation.
The committee acknowledges that “it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation.”
Until the review, USD/JPY may continue to retrace the decline from the yearly high (139.39) as it looks poised to test the monthly high (135.58), while the tilt in retail sentiment looks poised to persist as traders have been net-short the pair for most of the year.