USD/JPY bounces back towards 137.50 and approaches one-month highs ahead of US data.

  • USD/JPY attracts some buying on Tuesday and approaches one-month highs again.
  • The dollar remains near two-decade highs and offers support amid elevated US bond yields.
  • The policy divergence between the Fed and the Bank of Japan favors the bulls and supports the prospects for further gains.

The pair USD/JPY it reverses an intraday drop to the 137.00 level and is back close to the one-month highs reached this Tuesday at 137.71. The pair is now trading around 137.50 and is looking to consolidate its recent bull run of the last two weeks.

The US dollar hit a two-decade high amid Fed expectations, which turns out to be a key factor acting as a tailwind for the USD/JPY pair. Bullish traders took a cue from soaring US Treasury yields, causing the US-Japan rate spread to widen and undermining the Japanese yen. This, along with the policy divergence between the Fed and the Bank of Japan, favors the prospects for further appreciation in the short term.

Despite signs of easing in US inflation, recent statements by several Fed officials suggest that the US central bank will continue to tighten monetary policy to control inflation. By contrast, the Bank of Japan has repeatedly stated that it will maintain its ultra-easy monetary policy and remains committed to keeping the 10-year Japanese government bond yield around 0%. This, in turn, reaffirms the positive short-term outlook for the USD/JPY pair.

However, traders might refrain from making aggressive bullish bets and would rather wait for a tougher message from Fed Chairman Jerome Powell at the Jackson Hole symposium on Friday. Additionally, traders will be guided by this week’s major US macroeconomic releases. The combination of factors will play a key role in influencing the short-term USD price dynamics and help determine the next leg of a directional move for the USD/JPY pair.

Meanwhile, Tuesday’s economic calendar in the United States, with PMI data, new home sales and the Richmond manufacturing index, will boost the demand for the dollar. This, coupled with US bond yields and general market risk sentiment, should give the USD/JPY pair some momentum and allow traders to take advantage of short-term opportunities.

Technical levels

USD/CHF

Panorama
Last Price Today 0.9682
Today’s Daily Change 0.0041
Today’s Daily Change % 0.43
Today’s Daily Opening 0.9641
Trends
20 Daily SMA 0.9539
50 Daily SMA 0.9635
100 Daily SMA 0.965
200 Daily SMA 0.9443
levels
Previous Daily High 0.9659
Previous Daily Minimum 0.9574
Previous Maximum Weekly 0.9598
Previous Weekly Minimum 0.9409
Monthly Prior Maximum 0.9886
Previous Monthly Minimum 0.9502
Daily Fibonacci 38.2% 0.9626
Daily Fibonacci 61.8% 0.9606
Daily Pivot Point S1 0.959
Daily Pivot Point S2 0.954
Daily Pivot Point S3 0.9506
Daily Pivot Point R1 0.9676
Daily Pivot Point R2 0.971
Daily Pivot Point R3 0.9761

Source: Fx Street

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