USD/JPY discovers support near 148.50 as focus shifts to US PCE inflation

• USD/JPY finds support near 148.50 despite rising odds of BoJ’s intervention due to excessive volatile moves.
• S&P500 futures added significant gains, portraying an improvement in appeal for risk-sensitive assets.
• Investors will focus on the US core PCE inflation data for August, which will shape November’s monetary policy.

The USD/JPY pair attracts bids near 148.50 and rebounds strongly in the European session. The asset finds cushion despite hopes of a stealth intervention by the Bank of Japan (BoJ) in the FX domain to support the Japanese Yen against excessive volatility.

Unlike other developed economies, the Japanese Yen is struggling for a firm footing despite a correction in the US Dollar. The Japanese Yen fails to find support as the BoJ continues to support an easy monetary policy until the achievement of the 2% inflation target. This week, BoJ Governor Kazuo Ueda cited that it would be premature to discuss an exit from the ultra-loose monetary policy as inflation above 2% is not governed by wage growth.

The pair rebounds despite expectations of BoJ’s intervention near the psychological resistance of 150.00. Japanese Finance Minister Shunichi Suzuki reiterated on Thursday, he won't rule out any steps to respond if there's any excessive FX volatility. He further added the authority is closely watching FX's moves with a sense of urgency.

S&P500 futures added significant gains in the London session, portraying an improvement in the appeal for risk-sensitive assets. The US Dollar Index (DXY) extends its correction to near 105.70 as the risk appetite of the market participants improves.

Going forward, investors will focus on the United States core Personal Consumption Expenditure (PCE) inflation data for August, which will shape November’s monetary policy. As per estimates, the monthly core Personal Consumption Expenditure (PCE) price index is expected to maintain a steady pace of 0.2%. The annualized data is foreseen decelerating to 3.9% vs. July’s reading of 4.2%.