At the beginning of the week, the USD/JPY pair encountered substantial volatility, dropping by around 1.7% during the Asia-Pacific session, briefly breaking below the key support level of 146.00 to hit a low of 145.20. This sharp decline occurred in the context of muted trading volumes and a light news environment, suggesting that the price action may reflect market noise rather than a definitive trend. Looking ahead, the focus for USD/JPY traders will be on the forthcoming speeches by Bank of Japan (BoJ) Governor Kazou Ueda and Federal Reserve Chair Jerome Powell, both of which are scheduled for Friday and are expected to provide critical insights into their respective monetary policies.

Governor Ueda is set to testify before the Japanese parliament regarding last month’s interest rate hike, during which he adopted a notably hawkish stance. This stance contributed to an unwinding of carry trades and triggered a sell-off in Japanese equities. However, since then, BoJ Deputy Governor Shinichi Uchida has moderated the central bank's tone, which has supported a recovery in USD/JPY from the 141.70 level. Should Ueda's upcoming remarks align with Uchida’s more dovish position, the yen could weaken, potentially leading to a retest of the recent high near 149.40.

Meanwhile, Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium is highly anticipated by the markets. Powell faces a challenging task as the market has already set a high bar for dovishness, particularly after recent U.S. economic data has challenged the narrative of an impending economic slowdown. The current market consensus suggests 95bps of rate cuts by the end of the year, implying at least one 50bps cut in the remaining Federal Reserve meetings. However, it is more likely that the Fed will opt for a smaller 25bps cut in September, which Powell is expected to signal in his remarks. If Powell does lean towards a more conservative approach, this could lead to a limited rebound in the U.S. dollar, thereby containing further downside for USD/JPY.

From a technical perspective, USD/JPY remains within its established trading range of 146-148, having briefly tested and then bounced off support at 146. The pair’s recent failure to break above the 150 level suggests that additional gains may be capped unless Powell’s speech significantly surpasses the already high dovish expectations. On the other hand, the yen has found some support, with speculative traders now net long on JPY for the first time since 2021. This shift in market positioning could exert downward pressure on USD/JPY if Ueda’s testimony or Powell’s speech signals a dovish shift.

In summary, although USD/JPY has seen significant fluctuations, the prevailing conditions suggest that the pair may continue to oscillate within its current range. The upcoming addresses by Ueda and Powell will be pivotal in determining the direction of USD/JPY, with the potential for a move towards recent highs or further declines, depending on the tone and content of their statements.