USD/JPY sticks to intraday losses below 147.00, bears await break below 200-hour SMA

• USD/JPY opens with a bearish gap in reaction to BoJ Governor Ueda's hawkish signal.
• Bets that more rate hikes by the Fed underpin the USD and help limit losses for the pair.
• The fundamental backdrop warrants caution before positioning for any meaningful slide.

The USD/JPY pair opened with a big 85 pips bearish gap on the first day of a new week and remains depressed below the 147.00 mark through the first half of the Asian session. Spot prices, however, manage to defend the 200-hour Simple Moving Average (SMA) support, currently pegged around the 146.65 region, which should now act as a pivotal point for intraday traders.

The Japanese Yen (JPY) strengthens in reaction to the Bank of Japan (BoJ) Governor Kazuo Ueda's hawkish remarks over the weekend, signalling possible interest rate hikes, which, in turn, weighs on the USD/JPY pair. Ueda said the central bank could end its negative interest rate policy when achievement of the 2% inflation target is in sight, the Yomiuri newspaper reported Saturday. Ueda, however, reiterated that the BoJ will patiently maintain the ultraloose policy until it is convinced inflation will sustainably stay around 2%, backed by solid demand and wage growth.

In contrast, the Federal Reserve (Fed) is expected to deliver one more 25 bps rate hike by the end of this year and keep interest rates higher for longer. The bets were reaffirmed by The Wall Street Journal report that some officials still prefer to err on the side of raising rates too much, reasoning that they can cut them later. The outlook, meanwhile, remains supportive of elevated US Treasury bond yields, which helps limit a modest US Dollar (USD) pullback from its highest level since March 8 touched last week and acts as a tailwind for the USD/JPY pair, at least for now.

In the absence of any relevant market-moving economic releases on Monday, the aforementioned fundamental backdrop makes it prudent to wait for strong follow-through selling before confirming that spot prices have topped out in the near term. Traders might also prefer to wait on the sidelines ahead of this week's important US macro releases – the latest consumer inflation figures on Wednesday, followed by the Producer Price Index (PPI) and Retail Sales data on Thursday.

Technical levels to watch