• USD/JPY strengthened on Tuesday as the dollar firmed ahead of US Federal Reserve and BOJ rate decision this week.
•Renewed energy-driven inflation pressures, following a stronger-than-expected jobs report and a pickup in August consumer prices, have reinforced expectations that the Fed will raise interest rates on Wednesday..
• Economists surveyed by Reuters also expect at least one further rate hike by the end of March, reversing the fragile consensus for no change that prevailed before Friday’s official data showed inflation remained firm.
• Meanwhile, the BOJ is widely expected to raise its policy rate to 1.25% on Friday, its highest level since April 1995, as the central bank responds to persistent upward inflationary pressures..
•Both central banks tightening policy in parallel are likely to leave the 10-year bond yield gap at a wide 200 basis points, one of the key factors behind the yen’s weakness against the dollar over much of the past decade.
• Immediate resistance is located at 155.70 (38.2%fib), any close above will push the pair towards 157.16(SMA 20).
• Support is seen at 154.23(Daily low) and break below could take the pair towards 152.96(23.6%fib)
Recommendation: Good to buy around 154.50, with stop loss of 154.00 and target price of 155.60
