USD/JPY continues to trade near 158.50 after reports that the Bank of Japan is leaning toward leaving the rate unchanged at the October 30 meeting. The market quickly revised its expectations for the upcoming decision. The probability of a hike in October fell to about 10%, while for December it is estimated at around 88%.
Why the yen remains weak
On Tuesday, the dollar declined against most major currencies. But against the yen, the decline was minimal. This means the Japanese currency remained one of the weakest in the group. USD/JPY first moved below 158.00, but then returned to 158.50.
The pair remains in a narrow range
Since October 5, USD/JPY has been trading mainly between 157.50 and 159.00. As long as the price does not leave these boundaries, the market remains in a wait-and-see mode for a new catalyst. The nearest resistance is around 158.75. Support runs around 157.93, where the 100-period moving average is located. Below that, the next important zone remains 157.60.
Why the market fears intervention
Additional pressure on the pair comes from statements by Japanese authorities. Bank of Japan Governor Kazuo Ueda and Japanese Prime Minister Sanae Takaichi previously spoke of close contact with the US on the exchange rate. Because of this, the market remains on alert. If the yen continues to weaken rapidly, the risk of verbal or direct currency intervention may again come to the fore.
What the Bank of Japan pause means
If the regulator indeed does not raise the rate on October 30, the gap between US and Japanese rates will remain wide. This keeps pressure on the yen and supports USD/JPY. At the same time, the market has already partially shifted hike expectations to December. Therefore, the reaction will depend not only on the decision itself, but also on the Bank of Japan's rhetoric.
What events could push the pair out of the range
The nearest important factor is US inflation data. The producer price index will follow. Strong US data could support the dollar and push USD/JPY toward the upper boundary of the range. Weak data, on the contrary, could increase pressure on the dollar and bring the pair back closer to support.
What's next
Until the Bank of Japan meeting, the market will balance between expectations for the Japanese rate, US data, and the risk of currency intervention. For now, the 157.50-159.00 range persists. A break outside it could signal the start of a new directional move.
Trading the yen in such a corridor?
For a prop trader, USD/JPY may look like a convenient pair to trade from the range boundaries. But before central bank meetings, program rules may change. Different prop firms have different leverage limits, overnight position rollover, and trading conditions during major macroeconomic events. These points are best checked in advance, before October 30.