In July, the Bank of Japan's firm stance — signaling a possible further interest rate hike if economic growth and inflation forecasts are met — is supporting the yen's strengthening for the third consecutive day on Thursday.

At the same time, the U.S. dollar is trading near its lowest level in more than two weeks amid growing expectations that the Federal Reserve will cut interest rates at its September meeting. These expectations are reinforced by the latest disappointing U.S. macroeconomic data, including the July nonfarm payrolls report, which indicated signs of deterioration in the labor market. Additionally, U.S. consumer inflation data released on Tuesday matched forecasts, confirming the view that the recent price pressures linked to tariff hikes are temporary. This has increased the likelihood of a larger Fed rate cut than previously expected.

Recent economic news from Japan showed real wages declining for the sixth straight month, while slower growth in the Corporate Goods Price Index (CGPI) is heightening concerns about economic recovery driven by consumption.

Other factors — domestic political uncertainty and fears over the economic impact of U.S. tariff increases — could delay the Bank of Japan's plans for policy normalization. However, these developments do not appear to be of significant concern to yen traders.

Overall market sentiment toward risk remains positive, supported by expectations of further Fed rate cuts, a three-month extension of the U.S.–China trade truce, and optimism regarding the U.S.–Russia summit aimed at ending the conflict in Ukraine.

Today, for better trading opportunities, attention should be paid to the release of the U.S. Producer Price Index and comments from FOMC members. These events may stimulate demand for the U.S. dollar, giving USD/JPY some momentum during the North American session.

From a technical perspective, a breakout and consolidation below the 200-period Simple Moving Average (SMA) on the 4-hour chart, around the key 147.00 level, could serve as a fresh trigger for sellers. However, the Relative Strength Index (RSI) on this chart is nearing oversold territory, so it would be prudent to wait for intraday consolidation or a slight rebound before opening new short positions. Any recovery attempt is likely to attract new sellers and remain capped near the 147.00 level. This level is a key pivot point, and a decisive move above it could trigger short-covering toward the 147.30–147.50 level.

On the other hand, USD/JPY is poised to test support below the 146.00 level, around 145.30, before potentially extending its decline toward the psychological 145.00 level.