USD/JPY holds steady near 148.00 mark; upside potential seems limited

• USD/JPY gains some positive traction and stalls its corrective slide from a nearly two-month high.
• Hawkish BoJ expectations and sustained safe-haven buying underpin the JPY and cap spot prices.
• Fed rate cut bets keep the USD bulls on the defensive and further act as a headwind for the major.

The USD/JPY pair attracts some buyers during the Asian session on Wednesday and for now, seems to have snapped a three-day losing streak to sub-148.00 levels. The uptick, however, lacks follow-through, warranting some caution before confirming that the recent pullback from the vicinity of the 150.000 psychological mark, or the highest level since August 1 touched last week, has run its course.

The Summary of Opinions from the Bank of Japan's (BoJ) September policy meeting showed that board members debated the feasibility of raising interest rates in the near term. This reaffirmed market expectations that the central bank would stick to its policy normalization path. Apart from this, rising geopolitical tensions and the US government shutdown might continue to lend some support to the safe-haven Japanese Yen (JPY), which, in turn, could act as a headwind for the USD/JPY pair.

Meanwhile, the BoJ's hawkish stance marks a significant divergence in comparison to bets that the US Federal Reserve (Fed) will lower borrowing costs twice this year. The latter fails to assist the US Dollar (USD) in attracting any meaningful buyers. Moreover, the divergent BoJ-Fed policy outlooks should benefit the lower-yielding JPY and contribute to capping the USD/JPY pair. Hence, it will be prudent to wait for strong follow-through buying before positioning for any meaningful appreciating move.