USD/JPY Price Forecast: Capped below the 50% retracement of July’s plunge, at 159.50

The US Dollar (USD) holds a steady position against the Japanese Yen (JPY) on Thursday, as the expectations of a Federal Reserve interest rate increase in September have diminished. TD Securities analysts note that bulls are hindered by the 50% Fibonacci retracement of July's sell-off, currently at 159.50. While near-term inflation risks are still elevated, the Fed may be patient, indicating that the market has not yet recovered fully from the recent sell-off.

The USD traded weaker as the Consumer Price Index (CPI) data released remained in line with expectations, maintaining a negative bias toward the Dollar. Technically, USD/JPY exhibits a bullish near-term bias, but momentum indicators indicate a fading upside. The 50% Fibonacci retracement acts as a cap on upward movements, preventing the pair from reaching the psychological 160.00 level and the July 31 high of 160.90.

On the downside, the 38.2% retracement holds attempts, with key support levels at 157.30 (August 4 and 5 lows) and 157.28 (23.6% retracement).