Today, Wednesday, the Japanese yen posted its second consecutive day of gains amid the general weakening of the U.S. dollar. However, further development of this move is limited by uncertainty over the timing of a possible interest rate hike by the Bank of Japan.

Data released today show that wholesale inflation in Japan slowed for the fourth consecutive month in July. This, combined with domestic political instability and concerns about the potential negative effects of higher U.S. tariffs on the country's economy, suggests the likelihood of postponing further steps toward monetary policy normalization by the BoJ.

In addition, prevailing risk-on sentiment — reinforced by the extension of the U.S.–China trade truce and the U.S.–Russia summit aimed at ending the conflict in Ukraine — is another factor weighing on the safe-haven Japanese yen. Nevertheless, investors believe that the Bank of Japan will still raise interest rates by the end of this year. At the same time, the Federal Reserve is expected to cut rates in September, as indicated by U.S. consumer inflation data for July released on Tuesday, which largely matched forecasts. This keeps the U.S. dollar at lower levels and benefits the lower-yielding yen.

From a technical standpoint, the drop in price below the 100-period SMA and 100-EMA on the 4-hour chart favors the bears, but oscillators on the same chart are mixed, and prices have not fallen below the 200-SMA, confirming that buying is likely near the 147.00 and 147.30 levels. However, if the price falls below the round level of 147.00, where the 200-SMA is located, the momentum will shift back in favor of the bears.

On Wednesday, no major U.S. economic data releases are scheduled that could significantly impact the market, leaving the U.S. dollar influenced by speeches from Federal Open Market Committee (FOMC) members. After that, attention will turn to the U.S. Producer Price Index, due on Thursday. On Friday, preliminary data on Japan's Q2 GDP will be released, which could give a new impetus to the USD/JPY pair.