USD/JPY tries to recover 148.00 after bouncing from 147.50

• The dollar reversal from the 149.00 zone found support at 147.50.
• The dollar loses ground on hopes of an easing from the Fed.
• The yen remains on the defensive against the dovish attitude of the BOJ.

The dollar fell sharply on Tuesday and the USD/JPY pulled back from levels just below 149.00 to session lows at 147.50, where the pair has found buyers to attempt to recapture the 148.00 level.

Dollar falls on Fed easing hopes

The US dollar tumbled in the early trading hours on Tuesday following negative data on US house prices and consumer confidence. These figures and the disappointing S&P PMI index released on Monday have reignited fears that the Federal Reserve may be hurting growth with its sweeping monetary tightening plan.

Investor hopes that the Fed might be willing to slow its rate hike path in the coming months have boosted risk appetite. US stock markets extended gains after a mixed open, while Treasury yields fell, weighing on the dollar.

Today’s decline gives a break to the Japanese authorities, who are suspected of having intervened, on two occasions, to try to curb the yen’s weakness.

Last week, an alleged intervention by the Bank of Japan and the Ministry of Finance caused the paper to go from levels close to 152.00 to the area of ​​146.20. However, the dollar managed to recover more than half of the lost ground in the following two days.

A dovish BOJ will continue to hurt the yen

In the long term, the Japanese yen continues to be weighed down by the monetary policy spread, an aspect that could become more relevant in the coming days.

While the Bank of Japan is expected to maintain its ultra-easy policy on Friday, keeping bond yields close to zero, the Fed is expected to raise rates by 75 basis points over the next week. This is very likely to put negative pressure on the yen.

Technical levels to watch