• Fed Chair Powell noted that the central bank will stick to 25-bps rate cuts.

• Traders slashed the likelihood of a 50-bps November rate cut from 53.3% to 35.4%.

• Economists expect a slight improvement in US job growth.

The USD/JPY price analysis shows a rebound from recent lows after Powell’s hawkish remarks. Meanwhile, the yen was licking its wounds after Bank of Japan meeting minutes revealed caution about near-term rate hikes.

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On Monday, Fed Chair Powell struck a hawkish tone, noting that the central bank will stick to 25-bps rate cuts moving forward. At the last meeting, the Fed lowered borrowing costs by an unexpected 50-bps. After that, market participants moved to price an over 50% chance of another significant rate cut. 

However, after Powell’s speech, traders slashed the likelihood of a 50-bps November rate cut from 53.3% to 35.4%. Consequently, the dollar rallied, pushing the USD/JPY pair higher. This week, the US will release more high-impact reports shaping the outlook for rate cuts. The most significant is the US nonfarm payrolls report. 

Economists expect a slight improvement in job growth, with the unemployment rate at 4.2%. If the figures beat forecasts, rate-cut bets will drop further, boosting the dollar. On the other hand, if the labor market shows deterioration, markets will raise the likelihood of another massive rate cut.

Meanwhile, the yen gave up its election gains as policymakers sounded cautious in the BoJ minutes. Most officials called for patience as market turmoil clouded the outlook. At the same time, the Fed’s recent rate cut raised fears regarding the US economy.

USD/JPY key events today

• US ISM Manufacturing PMI
• US JOLTS Job Openings

USD/JPY technical price analysis: Struggling around 30-SMA 

On the technical side, the USD/JPY price has broken above the 30-SMA after finding support at the 1.1100 level. Meanwhile, the RSI trades slightly above 50, favoring bullish momentum. The previous bullish trend paused at the 1.1200 resistance level, where bears made an engulfing candle that broke below the SMA. 

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However, they failed to sustain the move lower, leading to a rebound. USD/JPY might consolidate if the price stays between the 1.1200 resistance and the 1.1100 support. However, if the bullish bias strengthens, the price might break above 1.1200 to make a new high.

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