USD/JPY loses traction below the 150.00 area, Fed’s Powell speech looms

• USD/JPY trades in negative territory near 149.80, down 0.10% on the day.
• The US Building Permits came in better than expected; Housing Starts arrived worse than the market consensus.
• The Bank of Japan (BoJ)’s quarterly report suggested a recovery in Japan’s economy for all regions.
• The Fed Chair Jerome Powell’s speech, Japanese inflation data will be closely watched events this week.

The USD/JPY pair loses momentum near 149.80 during the early European session on Thursday. The downside of the pair might be limited due to a rise in US Treasury bond yields. Meanwhile, the US 10-year Treasury yield surges to 4.966%, the highest level since 2007, and the 2-year Treasury yield stays at 5.246%. Investors await the Japanese inflation data on Friday for fresh impetus. Japan’s National Consumer Price Index (CPI) ex-fresh Food is expected to rise 2.7% YoY from 3.1% in the previous reading.

The US housing data on Wednesday showed mixed readings. The Building Permits fell to 1.475M in September, beating the market consensus of 1.45M whereas Housing Starts rose to 1.35M, worse than expected 1.38M, data published by the US Census Bureau. Additionally, the Fed Beige Book update showed the US economic outlook had “little to no change” between September and early October and the data might not convince the Federal Reserve (Fed) to abandon its current guidance.

Furthermore, Fed officials reaffirmed their stance to maintain interest rates at the current level. The Fed Governor Christopher Waller stated that it’s too early to tell if more policy rate action is needed while adding that the central bank can make the decision on policy path depending on the data. While Fed Bank of New York John Williams said the central bank needs restrictive monetary policy for a while to cool inflation.

Investors will take more cues from Fed Chair Jerome Powell’s speech in the American session. The hawkish comments from Fed officials on the policy outlook might lift the US Dollar demand and act as a tailwind for the USD/JPY pair.

The Bank of Japan (BoJ) raises its assessment for six of Japan’s nine economic regions in a quarterly report. The report indicated that Japan’s economy recovered moderately for all regions. But many regions saw exports and output moving sideways.

Earlier this week, Japanese Finance Minister Shunichi Suzuki denied to comment about currency intervention. Japan’s top financial diplomat Masato Kanda said that the Japanese Yen (JPY) continued to be considered a safe-haven asset and was benefiting from safe-haven flow caused by the geopolitical tension in the Middle East. Kanda additionally affirmed that if excessive moves occurred in the currency market, the authorities would take steps such as raising interest rates or intervening in the market. That said, the potential FX intervention by the Japanese authorities might cap the upside of the USD/JPY pair.

Looking ahead, market players will keep an eye on the US Jobless Claims, the Philly Fed index, and Existing Home Sales due later on Thursday. Also, Fed Chair Jerome Powell’s speech will be due later in the American session. On Friday, the Japanese National Consumer Price Index for September will be a closely watched event.