USD/JPY Trapped in Range as Markets Price in Potential BoJ Hike

The USD/JPY currency pair remains in a tight trading range as markets continue to price in the possibility of a Bank of Japan (BoJ) rate hike.

According to Scotiabank, this range-bound behavior is driven by both technical and fundamental factors. On the technical side, USD/JPY has found support near recent lows while resistance emerges at levels tied to previous intervention points.

Fundamentally, the yen is underpinned by improving Japanese wage growth and inflation, which bolsters the case for BoJ normalization.

However, Scotiabank cautions that the yen's upside may be limited unless the BoJ delivers a clear hawkish surprise. Elevated US Treasury yields provide a counterweight to yen strength, limiting its potential appreciation.