USD/JPY trades with mild positive bias blow 150.00, looks to key central bank meetings

• USD/JPY kicks off the new week on a positive note and recovers a part of Friday’s losses.
• The divergent BoJ-Fed policy outlook is seen as a key factor lending support to the major.
• Intervention fears might keep a lid on further gains ahead of the central bank event risks.

The USD/JPY pair attracts some dip-buying on the first day of a new week and for now, seems to have stalled its retracement slide from the 150.75-150.80 area, or the highest level since October 2022 touched last week. Spot prices, however, lack bullish conviction and currently trade around the 149.70-149.75 region, up less than 0.10% for the day, as traders look to key central bank meetings before placing fresh directional bets.

The Bank of Japan (BoJ) is scheduled to announce its decision on Tuesday amid mounting speculations about a possible change in the yield curve control (YCC) policy. The Japanese central bank, however, is unlikely to move away from its negative policy rates. This marks a big divergence in comparison to other major central banks, including the Federal Reserve (Fed), which, along with a positive risk tone, is seen undermining the safe-haven Japanese Yen (JPY) and turning out to be a key factor acting as a tailwind for the USD/JPY pair.

The US Dollar (USD), on the other hand, continues to draw some support from elevated US Treasury bond yields, bolstered by hawkish Fed expectations. Data released last week showed that the US economy grew at its fastest pace in nearly two years in the third quarter. Furthermore, the US Commerce Department reported that consumer spending increased more than expected in September and elevated monthly inflation print. This indicated that the US economy remains on a firm footing and supports prospects for a further tightening by the Fed.

Investors, however, seem convinced that the US central bank will maintain the status quo for the second straight time at the end of a two-day policy meeting on Wednesday. This, in turn, is holding back the USD bulls from placing aggressive bets. Apart from this, speculations that Japanese authorities will intervene in the FX market to combat a sustained depreciation in the JPY further contribute to capping the USD/JPY pair heading into the key central bank event risks. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders.

Technical levels to watch