Ella 
The USD/JPY saw some bargain hunting near the 149.35-149.30 level during Monday’s Asian session, but lacked follow-through orders and still ran into resistance from last Friday’s one-and-a-half-week high.
The U.S. dollar was unable to extend its gains after the release of the U.S. Consumer Price Index (CPI) over the past two trading days, and its performance on Monday was sluggish, which was negative for the U.S. dollar/yen. Several Fed officials said that the central bank may not raise interest rates in November as financial conditions tighten due to rising bond yields. This, in turn, prevents USD bulls from actively betting and acts as a headwind for USD/JPY.
In addition, speculation that Japan will intervene in the currency market in response to the continued depreciation of the yen has further suppressed USD/JPY fluctuations. However, a more dovish stance from the Bank of Japan (BoJ) and the maintenance of a bullish bias in U.S. stock futures are seen as weighing on JPY risk aversion and providing some support to the USD/JPY pair. Indeed, the Bank of Japan still believes that inflationary conditions are only temporary and has no plans to taper its large-scale monetary stimulus.
In contrast, the market continues to believe that the Fed is likely to raise interest rates again this year. Last week’s CPI report showed that inflation remains well above the Fed’s 2% target, supporting the prospect of further policy tightening. This continues to support higher US Treasury yields, which favors USD bulls and suggests minimal upside resistance for USD/JPY. Therefore, any pullback in USD/JPY can be seen as a long opportunity.
Market participants will now turn their attention to U.S. economic data, including the Empire State Manufacturing Index. This, along with the Fed speech and U.S. bond yields, will determine the direction of the market.
