USD/JPY Pair Faces Key Resistance at 155.20

The USD/JPY pair is showing a softer tone against the US Dollar this week, with all eyes on monetary policy decisions by the Federal Reserve and the Bank of Japan. The pair has picked up to levels near 155.00 but remains capped below 155.20, a previous resistance area that is likely to pose a significant challenge for US Dollar bulls.

Markets are pricing a 92% chance that the Fed will hike interest rates on Wednesday, according to the CME's Fed Watch Tool. The impressive employment report in August and hot inflation figures have boosted hopes that the central bank will tighten its monetary policy for the first time in three years this week.

Analysts at DBS Group Research note that pressure from US Treasury Secretary Scott Bessent has helped recast Japan's economic strategy away from reflation towards deregulation, investment, and shareholder-friendly structural reform. Even former BoJ-tightening sceptics are now acknowledging the case for higher rates, strengthening expectations for a hawkish hike on September 18.

Price action remains below the H&S's neckline at 155.20, with momentum indicators turning higher but remaining within bearish territory. The Relative Strength Index is at 37.70 and the Moving Average Convergence Divergence is below zero, reinforcing the idea that rallies are likely to face selling pressure.