USD/JPY consolidates its gains below 149.00 amid the cautious mood, fear of intervention

• USD/JPY takes a breather near 148.81 amid the cautious mood and fear of intervention.
• The higher for longer narratives in the US boosts the Greenback broadly, the highest since November.
• Bank of Japan (BoJ) policymakers said the central bank needs to patiently continue monetary easing.
• Japan’s Tokyo Consumer Price Index (CPI) and US Core Personal Consumption Expenditure (PCE) Price Index will be closely watched events.

The USD/JPY pair consolidates its recent gains after reaching the highest since October of 149.00 during the early Asian session on Tuesday. The stronger US Dollar (USD) is the main driver for the pair as the 10-year yield climbed to 4.53%, a level not seen since October 2007. The pair currently trade around 148.81, losing 0.04% on the day.

Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD relative to a basket of foreign currencies, hovers around 105.95 after retreating from the highest level since November of 106.09 amid the fear of intervention by the Japanese authorities.

The higher for longer narratives in the US boosts the Greenback broadly. The Federal Reserve (Fed) is expected to hike rates one more time by the end of the year. The Federal Reserve Banks of Boston and San Francisco Presidents, Susan Collins and Mary Daly, emphasized that although inflation is cooling down, additional rate hikes would be necessary. While the Chicago Fed President Austan Goolsbee said that a soft landing is possible, inflation risks remain tilted to the upside and the Fed should have a 100% commitment to returning inflation to 2%.

On the other hand, Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said on Monday, that the central bank needs to patiently continue monetary easing and needs to closely watch currency market moves. Similarly, the Bank of Japan (BoJ) Governor Ueda emphasized the need to spend more time assessing data before raising interest rates. This, in turn, might cap the upside of the US Dollar (USD) and act as a headwind for the USD/JPY pair.

Looking ahead, Japan’s Tokyo Consumer Price Index (CPI) for September, Industrial Production, and Retail Sales will be released on Friday. The attention will shift to the highly-anticipated US Core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred measure of consumer inflation. The annual figure is expected to drop from 4.2% to 3.9%. Traders will take cues from these figures and find trading opportunities around the USD/JPY pair.