Fed Rate Hike Expectations Rise, BoJ's Next Move Unclear, USD/JPY Fluctuates

News Alert from Huaxia Finance APP - On Monday, the yen traded quietly in a low-volatility environment during the holiday period, and the USD/JPY pair maintained its narrow range formed over the past week. Investors remain divided on the timing of Japan's next rate hike.

Although the BOJ had raised inflation expectations at its July meeting and reiterated the possibility of further policy tightening, the latest summary shows that policymakers are concerned about the potential negative impact of US tariff hikes on the domestic economy, which has tempered recent rate hike expectations.

Meanwhile, global risk assets have edged up slightly, eroding the yen's safe-haven appeal. The looming deadline for US tariff exemptions for Asian countries, as well as the upcoming Ukraine talks between the US and Russia, are keeping market sentiment cautious.

Federal Reserve Vice Chair Bowman noted that recent signs of labor market weakness have highlighted the fragility of the labor force, supporting his judgment on three interest rate cuts this year. Market expectations currently predict a nearly 90% probability of a September Fed rate cut, which has somewhat suppressed the dollar's rebound.

Without key economic data from the US on Monday, investors will focus on speeches by Fed officials and upcoming releases of US CPI, PPI data, as well as Japan's second-quarter GDP preliminary figure. The USD/JPY pair has maintained its intraday fluctuations within a range of 147.00 to 147.80, forming a rectangular consolidation pattern.

If the exchange rate can effectively break through the resistance zone around 147.80 (corresponding to the July rally's 38.2% Fibonacci retracement level), and stabilize above 148.00, it may trigger buying pressure pushing the price up towards the 148.50 area, with a further target of 149.00.

Conversely, if it breaks below 147.00 and 146.80 (the intersection of the 4-hour 200-period moving average and the 50% retracement level), it could open up space for a downward move, targeting psychological levels around 146.00 or even 145.00.

Editor's Viewpoint: The USD/JPY pair is currently in a stage of macro and technical signals intersecting, making it difficult to determine the trend short-term. Key data releases from the US and Japan this week may be decisive in breaking out of the current range.