The USD/JPY pair has hit a new annual low at 139.50, driven by a weaker US Dollar (USD) and anticipation of monetary policy decisions by the Federal Reserve (Fed) and the Bank of Japan (BoJ).
Fed Rate Cut Expectations
The Fed is expected to announce its first interest rate cut in over four years at its meeting on Wednesday. Market expectations for a larger-than-expected cut have increased significantly, with the CME Fedwatch tool showing a high probability of a 50 basis points (bps) reduction.
BoJ Monetary Policy
The BoJ is expected to maintain its current interest rate policy and hawkish guidance. However, market experts believe that the BoJ may raise interest rates to 0.5% by the end of the year.
Economic Data
Investors will also focus on the US Retail Sales data for August, which is expected to show a slowdown in consumer spending.
Technical Analysis
The USD/JPY pair has a bearish outlook, with potential support levels at 138.00 and 137.00. A break below these levels could signal further downside.
