USD/JPY Faces CPI Volatility as Fed Rate Cut Expectations Rise

USD/JPY remains under pressure as markets position ahead of crucial Japanese inflation data, with Fed rate cut expectations dominating sentiment. The pair has been consolidating near recent lows as traders anticipate Japan's Consumer Price Index release, which could influence Bank of Japan policy decisions. Market pricing now reflects increased probability of Federal Reserve rate cuts in 2025, weighing on dollar strength across major pairs. The S&P 500 futures and VIX volatility index movements suggest risk sentiment remains fragile, potentially supporting safe-haven yen flows. Technical indicators point to key support at the 145.00 psychological level, while resistance emerges near 147.50. A stronger-than-expected Japanese CPI reading could accelerate yen appreciation, particularly if it reinforces expectations for BOJ policy normalization. Conversely, disappointing inflation data might provide temporary relief for USD/JPY bulls, though broader dollar weakness from Fed cut speculation continues to cap upside potential.