USD/JPY trims part of modest gains amid geopolitical risks, up a little around 146.75-80 area

• USD/JPY kicks off the new week on a positive note, albeit lacks any follow-through buying.
• Persistent geopolitical risks lend support to the safe-haven JPY and cap gains for the major.
• The divergent BoJ-Fed policy expectations also contribute to keeping bulls on the sidelines. 

The USD/JPY pair attracts some dip-buyers on the first day of a new week, albeit struggles to find acceptance above the 147.00 mark and capitalize on the move up. Sot prices surrender a major part of the intraday gains and currently trade with a mild positive bias, around the 146.75-146.80 region. 

A former Bank of Japan (BoJ) board member Makoto Sakurai said that the central bank will not be able to hike again in 2024 and predicts a rate hike by March 2025 citing the recent market turmoil and the low likelihood of a rapid economic recovery. This comes on top of the recent dovish remarks by BoJ Deputy Governor Shinichi Uchida, saying that the central bank won't hike rates when markets are unstable, and undermines the Japanese Yen (JPY), lending some support to the USD/JPY pair. 

Apart from this, a generally positive tone around the equity markets dents the JPY's relative safe-haven status, which, along with a modest US Dollar (USD) uptick, contributes to the bid tone surrounding the USD/JPY pair. Meanwhile, the BoJ's summary of opinions from the July policy meeting released last week indicated that some members see room for further rate hikes and policy normalization. Moreover, geopolitical risks help limit deeper JPY losses and cap the USD/JPY pair. 

In fact, the Israeli intelligence community believed that Iran has decided to attack Israel directly and may do so within days in retaliation for the assassination of Hamas leader Ismail Haniyeh in Tehran in late July. Furthermore, US Defense Secretary Lloyd Austin told his Israeli counterpart, Gallant, in a call that he has ordered the USS Abraham Lincoln carrier strike group to accelerate its transit to the Middle East and the USS Georgia guided missile submarine to the Central Command region.

This poses the risk of a further escalation of geopolitical tensions in the Middle East. Apart from this, 
rising bets for bigger interest rate cuts by the Federal Reserve (Fed) in September hold back the USD bulls from placing aggressive bets. This, in turn, contributes to keeping a lid on the USD/JPY pair amid relatively thin liquidity on the back of a holiday in Japan and absent relevant market-moving economic data.

Traders also seem reluctant and might prefer to wait on the sidelines ahead of this week's release of the US consumer inflation figures before placing fresh directional bets. The crucial CPI report will play a key role in influencing the Fed's future policy decisions, which, in turn, should provide some meaningful impetus to the Greenback and the USD/JPY pair.