Ella 
USD/JPY struggled to extend the gains of the past three days during the Asian session on Tuesday, trading in a narrow range above the mid-157.00 level. However, USD/JPY remains within striking distance of its highest level since late April hit on Friday and appears poised to extend the recent uptrend established.
Despite the hawkish Fed policy stance, the market has been pricing in two rate cuts from the Fed this year amid signs of easing inflationary pressures in the US. This has kept dollar bulls on the defensive for a second day in a row, becoming a key factor holding back USD/JPY. Moreover, speculation that Japanese authorities may intervene to support the Japanese yen (JPY) also weighed on USD/JPY further.
Meanwhile, Fed officials continue to advocate for one rate cut in 2024. In fact, Philadelphia Fed President Patrick Harker said on Monday that keeping rates at current levels for a little longer would help reduce inflation and mitigate upside risks. This remains supportive of rising US Treasury yields and could limit the dollar’s losses. Moreover, the Bank of Japan’s (BoJ) cautious policy bias should limit significant gains in the yen and provide some support to the USD/JPY pair.
The above fundamental backdrop seems firmly in favor of the bulls, suggesting that USD/JPY’s upside resistance remains the path of least resistance. Therefore, any consolidation decline in USD/JPY may still be seen as a buying opportunity as traders now turn their attention to US macro data, retail sales and industrial production data. These data, along with speeches by influential Fed officials, should provide some momentum to the USD/JPY pair ahead of the release of the central bank’s policy meeting minutes on Wednesday.
