The Japanese yen generally rose against major currencies in early Asian trading on Tuesday, with USD/JPY retreating from a high of 153.30 to below 152. Investors adjusted their positions ahead of the two major central banks' policy meetings, with yen shorts choosing to take profits.

Japanese Minister of Economic Revitalization Minoru Kiuchi said on the same day that foreign exchange trends should remain stable and reflect fundamentals, and the government will closely monitor the impact of exchange rate fluctuations on the domestic economy.

These remarks were interpreted by the market as "verbal intervention", triggering market expectations that Japan may take substantial intervention measures to curb the depreciation of the yen.

Meanwhile, data released on Monday showed that Japan's service sector producer price index (SPPI) rose 3.0% year-on-year in September, accelerating for the second consecutive month. The data reinforced market expectations that the Bank of Japan may implement gradual interest rate hikes in December or early next year, in stark contrast to market expectations of an imminent rate cut by the Federal Reserve.

Shunsuke Takahashi, an economist at Tokyo Foreign Exchange Research Institute, said: "The BoJ faces pressure to adjust its policy amid rising inflation, and Kiuchi's statement suggests the government is reluctant to see excessive depreciation, which provides short-term support for the yen."

In the United States, the market generally expects the Federal Reserve to announce a 25 basis point interest rate cut to a range of 3.75%-4.00% after its two-day policy meeting. In addition, investors have basically priced in the possibility of another rate cut this year.

This expectation has curbed dollar buying, reducing the upward momentum of USD/JPY. However, the yen's gains are still limited by the fiscal policy stance of new Prime Minister Sanae Takaichi.

Kaohsiung, known for her "aggressive fiscal stimulus" stance, has signaled her intention to boost economic growth through expansionary spending plans, which could delay further tightening of policy by the BoJ.

Markets will be closely watching the Bank of Japan's policy update on Thursday for signals on a December rate hike.

From a technical perspective, USD/JPY is showing a short-term trend of retreating from a high. The price is facing significant resistance near 53.30. If it falls below the support level of 152.00, further downside potential will be seen, with the target around 151.50. If this range is breached, the price may drop to 151.00.

On the upside, initial resistance is located near 153.00, followed by 153.30 and 154.00. If bulls regain control, the price may extend to 154.50 and 155.00 psychological levels.

The RSI fell back below the neutral zone, and the MACD showed signs of a death cross, strengthening the short-term bearish signal.


Editor's opinion:

The yen's current trajectory reveals a complex intertwined landscape of policy expectations and interventionist expectations. While government officials' comments briefly bolstered the yen, Sanae Takaichi's fiscal expansionary plans imply limited room for monetary policy tightening.

If the Bank of Japan hints at a future rate hike path this week, the yen could see a temporary strengthening; conversely, if the policy tone turns dovish, the exchange rate could return above 153. Overall, this week's central bank meetings will be a key catalyst in determining the direction of the USD/JPY exchange rate, significantly increasing the risk of short-term market volatility.