USD/JPY falls below 146.00 to multi-day lows following Ueda’s hawkish comments

• USD/JPY falls to multi-day lows on Monday in reaction to hawkish statements by BOJ Governor Ueda.
• A modest USD pullback from a six-month high contributes to the sharp intraday decline.
• Diverging monetary policy outlooks between the Fed and BoJ limit the pair’s losses ahead of key US macroeconomic data this week.

The buying interest around the Japanese Yen (JPY) remains at the beginning of the European session on Monday and drags the USD/JPY pair to lows around 145.90 in the last hour. The pair has retreated nearly 200 pips from the highest level since November 2022, near the 147.85 area touched on Friday and is pressured by a combination of factors.

The Japanese Yen (JPY) strengthens against all Group of 10 currencies in reaction to Bank of Japan Governor Kazuo Ueda’s hawkish statements signaling possible interest rate hikes. In an interview with the Yomiuri newspaper published on Saturday, Ueda said ending negative interest rates is one of the options available if the BoJ is confident that prices and wages will continue to rise sustainably. This, along with a modest dollar pullback from its six-month high, contributes to the selling tone surrounding the USD/JPY pair.

Furthermore, the latest move lower in the last hour could also be attributed to some technical selling below the support of the 200 hourly SMA. That said, growing acceptance that the Federal Reserve (Fed) will maintain its hawkish stance and keep interest rates higher for longer should limit any significant decline in the USD. These expectations were reinforced by a report in The Wall Street Journal, which noted that some officials still prefer to err on the side of raising rates too much, reasoning that they can cut them later.

These prospects, meanwhile, continue to support elevated US Treasury yields and should act as a tailwind for the dollar. This, along with Ueda reiterating the need to continue patient monetary easing as the Bank of Japan is some distance away from achieving its price stability target, supports prospects for some buying at higher levels. lows around the USD/JPY pair. This, in turn, justifies caution before opening aggressive bearish bets and positioning for greater losses in the absence of the publication of relevant macroeconomic data.

In addition, the latest consumer inflation (CPI) figures in the United States will be published on Wednesday. Next, on Thursday, the US Producer Price Index (PPI) and monthly retail sales data will be released. Apart from this, the volatility infused by the European Central Bank (ECB) will boost the demand for USD and provide a significant boost to the USD/JPY pair. Meanwhile, fears that Japanese authorities could intervene to prop up the national currency should keep the pair in check.

USD/JPY technical levels to watch