Ella 
USD/JPY attracted some bargain hunting on Tuesday but struggled to extend modest gains and remains below the highest level since November 2022 hit last week. Spot prices are trading near the 147.70 area, with an intraday increase of less than 0.10%, as traders are eagerly awaiting the risks of key central bank events this week.
The Federal Reserve (Fed) is due to announce its interest rate decision on Wednesday and is widely expected to keep interest rates unchanged. However, market participants appear confident that the Fed will stick to its hawkish stance and keep interest rates higher for longer. The outlook for elevated U.S. Treasury yields remains favorable, helping to stem a corrective pullback in the U.S. dollar (USD) from six-month highs and providing support for USD/JPY.
Still, speculation that the Bank of Japan (BoJ) is about to turn dovish has hampered traders from placing a fresh round of bullish bets around the pair. Bank of Japan Governor Kazuo Ueda said in an interview with the Yomiuri newspaper that if the central bank is convinced that prices and wages will continue to rise, ending negative interest rates is also one of the options. That in turn has boosted bets that the Bank of Japan may abandon its ultra-easy policy.
Therefore, Friday’s Bank of Japan policy meeting will also be in focus. Investors will be looking for forward guidance from the Bank of Japan on when it will reverse its negative interest rate policy. This, in turn, will have a key impact on Japanese yen trends and provide new directional momentum for the USD/JPY pair. Meanwhile, traders may look to U.S. housing market data on building permits and housing starts on Tuesday for short-term opportunities.
From a technical perspective, the range-bound price action over the past two weeks or so can still be classified as a bullish consolidation phase, against the backdrop of the recent move to multi-month highs. This, in turn, suggests that the path of least resistance for USD/JPY is to the upside. However, it would still be prudent to wait for a break above the trading range resistance (just before the 148.00 mark) before establishing positions for further gains.
