USD/JPY Bulls Face Threat of Larger Retracement Amid Rate Decisions

The USD/JPY currency pair has been a bullish darling for over five years, but recent events have sparked concerns that this trend may be reversing. The fundamental bias remains tilted to the long side, but the question now is whether a larger retracement is ahead.

This week's rate decisions from Japan and the US are expected to bring significant changes, with Scott Bessent predicting the Bank of Japan's actions. The dual intervention in late-July has already shifted the market dynamics, and the Fed's expected rate hike this week could further diverge the pair's trajectory.

While the dip-buying mentality remains strong, traders should be cautious, as sellers have been using rallies to sell the pair, such as the recent 155.00 test. The four-hour chart suggests support around prior resistance at 153.73, but the risk of a comment or intervention from policymakers cannot be ruled out.

For shorts, the more attractive path forward may lie in exhaustion after a 155.00 test, with key levels looming above and below the big figure.