BoJ Rate Hike Anticipation Lifts Yen, USD/JPY Pairs Weakens

The Japanese Yen (JPY) has seen gains as markets prepare for an aggressive interest rate hike by the Bank of Japan (BoJ). The USD/JPY pair slipped during the Asian trading hours on Thursday, breaking a three-day advance and pulling back from a nearly two-week high. Market participants are pricing in a 25 basis point BoJ rate hike to 1.25%, with an additional increase expected in December due to inflation risks.

The US Dollar has been supported by the post-Fed rally, oil-driven inflation concerns, and heightened geopolitical tensions in the Middle East. The Federal Reserve's latest policy decision on Wednesday raised borrowing costs for the first time in over three years, signaling a possibility of one additional increase later this year. Expectations that higher oil prices could stoke inflation have underpinned the case for further tightening.

The technical picture suggests a cautious, near-term bearish tone while trading below a key resistance band at 156.60-156.65 on the 4-hour chart. The broader structure remains intact, suggesting rallies are vulnerable as long as the corrective phase from the cycle peak remains intact.