Yen faces Tokyo CPI and a BoJ decision as central bank week draws to a close

• Trading just below 158.00, USD/JPY has recovered the bulk of its October 22-23 decline.
• Most Fed officials do not view the economy as overheating, according to Fed Chair Warsh.
• Ahead of Friday's BoJ decision, markets assign a probability of nearly 86% to rates remaining at 1.25%.

USD/JPY has recouped most of its October 22-23 losses, with the Fed's decision to keep rates unchanged failing to extend that decline. Before the decision, the pair traded above 158.00; as Fed Chair Warsh's press conference opened, it reached a session peak below 158.50. It has since returned to just below 158.00, remaining above the session trough of slightly over 157.50.

The move above 158.00 unwound while Fed Chair Warsh answered questions, following the Fed's decision to retain rates at 3.75%-4.00%, compared with 1.25% at the Bank of Japan (BoJ). Warsh said most Fed officials did not consider the US economy to be overheating and that stronger growth did not, on its own, imply higher inflation.

A worldwide sell-off in technology shares accompanied USD/JPY's October 22-23 decline, as investors repurchased the Yen they had borrowed. The pair subsequently recovered alongside a rebound in chip stocks on Monday and Tuesday. Compared with Monday's chip-stock recovery, Wednesday's Fed announcement and press conference produced a narrower trading range in USD/JPY.

Which releases could shape the rate gap?

The Fed side of USD/JPY's interest-rate differential will be informed by Thursday's US third-quarter growth and September price releases at 12:30 GMT. At 23:30 GMT, attention turns to Tokyo's October Consumer Price Index (CPI): the reading excluding fresh food is projected at 2.6%, down from 2.7%. Japan's unemployment rate is expected to remain at 2.5%.

No fixed release time has been set for Friday's BoJ decision. The quarterly outlook report is scheduled for 03:00 GMT, followed by questions to BoJ Governor Ueda at 06:30 GMT. As markets price in nearly an 86% chance of unchanged rates, these events will have a bearing on when the next hike comes, shaping the BoJ side of the differential.

Where does USD/JPY stand on the charts?

USD/JPY sits between its 50-day and 200-day Exponential Moving Averages (EMA), which are separated by roughly a fifth of a yen. Its trading range since October 1 extends from slightly above 156.00 to just below 159.00, with the October 23 trough marking the lowest point across those sessions.

Daily chart: USD/JPY