USD/JPY whipsaws above 146.00 on BOJ’s status quo, focus on Kuroda’s speech, US PCE Inflation

• USD/JPY fades the bounce off a three-week low as BOJ defends easy money policy.
• BOJ keeps monetary policy unchanged, as expected, stays cautiously optimistic on economic outlook
• Easing hawkish Fed bets, downbeat yields also keep pair sellers hopeful ahead of Fed’s preferred inflation data.
• Kuroda’s presser, Japan’s supplementary budget will also be crucial for intraday directions.

USD/JPY marked a volatile move above 146.00 by initially refreshing the daily top before renewing the bottom, staying pressured around 146.35 at the latest, as the Bank of Japan (BOJ) defends its easy money policy in Friday’s meeting. With this, the yen pair braces for the second consecutive weekly loss as the latest reduction in the hawkish Fed bets weigh on the US Treasury yields ahead of the Fed’s preferred inflation gauge, namely the US Core PCE Price Index for September.

BOJ matched wide market forecasts by keeping its benchmark rate at -0.1% and the Yield Curve Control (YCC) practise to defend the 10-year Japanese Government Bond yields (JGBs) near 0.0%. It should, however, be noted that the Japanese central bank also cited expectations of economic recovery despite mentioning the broad fears, which could have drowned the USD/JPY prices.

Also read: BOJ Quarterly Outlook Report: Developments in FX rates, international commodity prices seen as risk to prices

Elsewhere, Thursday’s US data weighed on the Fed wagers even as the headline US Gross Domestic Product (GDP) rose 2.6% on an annualized basis, more than expected, in the third quarter (Q3). Even so, a fifth consecutive fall in private consumption challenged the Fed hawks as it showed the policymakers are gradually nearing the target of slowing down private domestic demand, which in turn might favor the easy rate hike talks for December in the next week’s Federal Open Market Committee (FOMC) meeting.

That said, the sluggish US Treasury yields and the risk-off mood could also be held responsible for the USD/JPY pair’s latest weakness.

Recently, the International Monetary Fund (IMF) cut Asia's growth forecast to 4.0% this year and 4.3% next year, down 0.9% point and 0.8 points from April, respectively. The slowdown follows a 6.5% expansion in 2021, per Reuters.

The US 10-year Treasury yields dropped to a two-week low on Thursday and are bracing for the first weekly loss in 11, which in turn allowed equities to have a nice week despite the latest weakness in numbers.

Looking forward, a speech from BOJ Governor Harushiko Kuroda, Japan’s supplementary budget announcement and the US Core PCE Price Index for September, expected to rise to 5.2% versus 4.9% prior, will be crucial for the USD/JPY pair traders to watch for clear directions. A firmer print of the Fed’s preferred inflation gauge could add strength to the yields and hawkish Fed bets, which in turn will be favorable for the pair buyers.

Technical analysis

A clear downside break of the 12-wee-old ascending trend line, around 147.40, joins the USD/JPY pair’s failure to cross the 21-DMA hurdle of 146.90 during the previous day’s corrective bounce to keep the bears hopeful.