The Japanese yen regains momentum against the dollar amid renewed expectations of a dovish stance from the Fed.

USD/JPY extends its decline on Monday, signaling that the corrective phase from the 141.68 low (August 5 spike) may be coming to an end.

The rally from 141.68 faced repeated resistance at the key Fibonacci level of 149.36 (38.2% retracement of the 161.80 to 141.68 move), with renewed risk appetite triggering the recent weakness.

The yen also gained support on expectations that the policy gap between the Fed and the BOJ could widen further. With dovish sentiment creeping back into forecasts for the Fed’s monetary policy, while the Bank of Japan maintains a more hawkish stance, the dollar is losing ground.

Attention now turns to two key events this week: the FOMC minutes and Fed Chair Powell’s speech at the Jackson Hole symposium. These could provide more clarity on the Fed’s direction, with markets largely anticipating a 25 basis point rate cut in September. However, the possibility of a 50 basis point cut has reemerged, adding to expectations of a more dovish Fed, which could further weaken the dollar.

Technical indicators are turning bearish on the daily chart following the break below the 10-day moving average (146.93) and a dip under the 50% retracement of the 141.68 to 149.40 move. Negative momentum remains strong, with RSI and Stochastic heading downward.

A daily close below the 10-day moving average is needed to confirm the bearish trend, while a sustained break below 145.51 (50% retracement) would strengthen the bearish outlook, targeting further declines toward 144.63 and 143.50 (61.8% and 76.4% Fibonacci levels, respectively).

Res: 146.94; 147.58; 148.05; 148.22
Sup: 145.54; 145.18; 144.63; 143.50