The USD/JPY pair strengthened to around 158.30 during Tuesday’s Asian session, supported by a modest US Dollar (USD) rebound and anticipation of key economic data and Fed commentary.

Fed Officials Signal Potential Rate Cuts

Recent remarks from Fed Chair Jerome Powell and San Francisco Fed President Mary Daly have fueled optimism about potential interest rate cuts in the near future. Powell’s comments regarding the progress made on inflation and Daly’s acknowledgement of cooling price pressures have bolstered market expectations for a September rate cut, as reflected in the CME FedWatch Tool.

Japanese Authorities Monitor FX Movements

While the prospect of lower US interest rates could weigh on the USD, potential intervention by Japanese authorities may offer some support to the Japanese Yen (JPY). Recent statements from Japanese officials have expressed concern about rapid currency fluctuations and a willingness to take necessary measures to stabilize the JPY.

Key Market Drivers:

• US Retail Sales: June data, due later today, will provide insights into consumer spending and its impact on inflation.
• Fed Speak: Investors will closely watch Fed Governor Adriana Kugler’s speech for further clues on the Fed’s policy trajectory.
• Japanese FX Intervention: Potential action by Japanese authorities could influence the USD/JPY pair’s direction.

Technical Outlook:

The USD/JPY pair has rebounded above 158.00, but its near-term trajectory remains uncertain. Traders should closely monitor the upcoming US Retail Sales data and Fed commentary for potential catalysts.