Japanese Yen remains near two-week low against US Dollar despite hawkish BoJ bets

The Japanese Yen (JPY) is trading near its two-week low against the US Dollar (USD) on Tuesday, with the USD/JPY pair at around 159.50. Despite financial markets expressing confidence in a Bank of Japan (BoJ) interest rate hike during the September meeting, analysts at MUFG emphasize that market expectations for further BoJ tightening remain robust.

They argue that this strong rate-hike pricing, coupled with softer US data, should help limit renewed Yen selling in the near term. In the latest BoJ Summary of Opinions (SoP), several board members favored additional monetary tightening following the decision to leave interest rates unchanged at 1%. However, Japan's weaker-than-expected Q2 Gross Domestic Product (GDP) data may act as a headwind for firm BoJ hawkish bets.

The GDP growth in Q2 was reported at 0.3% quarter-over-quarter, below consensus expectations of 0.5%, and was largely driven by net exports (+0.5%), government consumption (+0.3%), and private inventories (+0.3%). Meanwhile, the US Dollar (USD) is poised to trade sideways as Federal Open Market Committee (FOMC) minutes from the July policy meeting, released on Wednesday, will provide fresh insights regarding inflation and the economic outlook.

Technical analysis shows that the USD/JPY pair is trading below a dense Fibonacci retracement cluster, with immediate resistance at the 50.0% level (159.64) and the next barrier at the 61.8% level (160.67).