Japanese Yen retreats from one-month top vs recovering USD as focus remains on Fed and BoJ

The USD/JPY currency pair experiences a rebound from a one-month low near 156.00 after Japan's consumer price index data is released. However, the pair struggles to surpass the 157.00 mark and is on track for substantial weekly declines. The latest figures from Japan's Statistics Bureau show that the nationwide consumer price index (CPI) increased from 1.9% year-over-year in the previous month to 2.1% in September, with the core CPI (excluding volatile fresh food prices) reaching a 10-month high of 2.5%.

This strengthens the Bank of Japan (BoJ) in its interest rate hikes. The initial market reaction, however, fades quickly as a modest recovery in the US Dollar (USD) aids the USD/JPY pair, attracting some dip-buyers at lower levels. Despite the Federal Reserve's lack of urgency for a rate hike, traders anticipate a December rate increase, with an 80% chance according to the CME Group's FedWatch Tool.

Geopolitical tensions in the Middle East and energy price inflation heighten the case for further Fed tightening, bolstering the demand for the safe-haven US Dollar. However, the upside is limited as traders hesitate before the Federal Reserve's rate decision on October 28 and the Bank of Japan's meeting on October 29-30. The USD/JPY pair remains below the 200-day Simple Moving Average at 158.55 and beneath the 23.6% Fibonacci retracement at 157.56, indicating that recent attempts to revive the broader uptrend are met with resistance.

The downside support appears at the 38.2% retracement at 156.68, followed by the 50.0% level at 155.98, and deeper Fibonacci levels at 155.27 and 154.26, with a more distant structural base around 152.97.