Yen Weakens as Dollar Holds Steady Ahead of Fed Signals

In the currency markets, the yen continues to lose ground rapidly. The sharp decline began on Monday when the USD/JPY pair opened with a price gap and consolidated above 149. It has since extended its rise, approaching 150.10 — its highest level since August. The move followed Sanae Takaichi’s election as the new leader of Japan’s ruling Liberal Democratic Party, effectively paving her way to the post of prime minister.

Takaichi, known for supporting expansionary fiscal policy, is likely to slow the Bank of Japan’s plans to raise interest rates. This has prompted a reassessment of market expectations: the probability of a rate hike by December has fallen from 68% to 41%.

The USD/CAD pair remains close to key levels, reflecting the consolidation of the US dollar, which has traded without clear direction in recent days. Market sentiment is also being influenced by the looming threat of a US government shutdown, which could delay the release of key macroeconomic data and increase uncertainty around the Federal Reserve’s next steps.

Investors will focus on speeches by Fed officials (including Logan, Daly, and Kashkari), the release of the FOMC minutes, as well as construction and energy data. Fed funds futures currently imply a 95% probability of a rate cut in October, though traders remain cautious, awaiting further signals. The dollar is holding its ground, while the yen remains the week’s main underperformer amid Japan’s political shifts.

USD/JPY

USD/JPY buyers have pushed the pair to fresh year-to-date highs around 151.00. If the current upward momentum continues, the pair could strengthen towards the key 154.30–153.20 range. In the event of a corrective pullback, the pair may test the 150.60–151.20 area.

Factors that could influence USD/JPY movement:
→ 14:00 (GMT+3): US 30-year mortgage rate (MBA)
→ 16:30 (GMT+3): Speech by Michael S. Barr, Fed Vice Chair for Supervision
→ 17:00 (GMT+3): US construction spending data

USD/CAD

The USD/CAD pair is trading within a narrow range between 1.3970 and 1.3940. After rising towards the upper boundary of this range, the price entered a consolidation phase. A positive news backdrop for the greenback could help the pair secure a break above 1.3970 and test key resistance levels at 1.4000–1.4100. A move below 1.3940, however, could signal the start of a deeper downward correction.

Factors that could influence USD/CAD movement:
→ 17:30 (GMT+3): US crude oil inventories
→ 18:00 (GMT+3): Canada Thomson Reuters/Ipsos Primary Consumer Sentiment Index (PCSI)
→ 22:00 (GMT+3): FOMC meeting minutes release

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