On Monday, the USD/JPY struggles to generate real momentum for several reasons. Bets on a future BoJ pivot help the JPY and limit the upside during a slight decline in the USD. Increased US bond rates may underpin the major and contain USD losses. Ahead of the BoJ policy meeting on Tuesday, traders could also want to stay out of the market.

On Monday, the USD/JPY pair failed to benefit from its little intraday increase and drew some sellers in the 136.60 area. During the early European session, the pair retreats to the lower end of its daily range, below the 136.00 level, under pressure from several factors.

A weekend report that the government may change and make the Bank of Japan’s 2% inflation objective more flexible lends some support to the Japanese Yen. The BoJ’s ultra-loose monetary stance, which has been a major contributing cause to the recent decline in local currency, may be modified due to the modification. In addition, a decline in the US dollar value works as a drag on the USD/JPY pair.

However, the USD’s downside is still muted despite a rise in US Treasury bond rates, supported by the Fed’s more pessimistic remarks last week. The US central bank predicted that borrowing prices would rise by at least 75 basis points by the end of 2023 to combat inflation. The USD/JPY pair is therefore perceived as receiving some support.

Ahead of the BoJ monetary policy meeting on Tuesday, traders may decide to forgo putting risky wagers and instead choose to remain passive. Because no relevant macro data is available, this calls for considerable caution before preparing for a definite intraday direction. The current slump is still unresolved, as seen by the USD/JPY pair’s struggle to acquire momentum.

Furthermore, a rectangle has formed on the daily chart due to the price movements that have been range-bound for the previous two weeks. This is still considered a bearish consolidation, given the recent steep corrective drop from a 32-year top. However, a further decline and acceptance below the crucial 200-day SMA are required to validate a new breakdown.