- USD/JPY encounters aggressive buying on Monday and rises to a fresh 24-year high.
- The monetary policy divergence between the Fed and the Bank of Japan continues to support the strong positive movement of the pair.
- Risk-off sentiment offers some support for the JPY as a safe haven and caps the pair’s gains.
The pair USD/JPY seems to have entered a phase of bullish consolidation and oscillates in a range around the level of 137.00just a few pips below a new maximum of 24 years played this very Monday.
The good result in the elections of the conservative coalition in power in Japan will not change the ultra-loose monetary policy adopted by the Bank of Japan. In addition, the governor of the Bank of Japan, Haruhiko Kuroda, reiterated on Monday that the central bank remains ready to take additional monetary easing measures if necessary. This, in turn, was seen as a key factor weighing on the Japanese yen and providing a good boost to the USD/JPY pair amid a new wave of buying interest around the US dollar.
In fact, the dollar index returned to approach two-decade highs reached on Friday and continued to be supported by expectations that the Fed would maintain its aggressive tightening policy. Bets were bolstered by FOMC minutes released last Wednesday, which indicated that another rate hike of 50 or 75 basis points was likely at the July meeting. In addition, the monthly US employment report helped the dollar get fresh deals on Monday and acted as a tailwind for the USD/JPY pair.
Nevertheless, the risk-off environment, amid growing fears of a possible global recession, offered some support to the safe-haven Japanese yen. Aside from this, the softer tone around US Treasury yields deterred bulls from opening new positions and capped USD/JPY gains, at least for now. Nevertheless, the divergence between the monetary policy of the Fed and the Bank of Japan supports the prospects of an extension of the upward movement in the short term.
The market’s attention is now focused on the release of the latest US CPI consumer inflation figures due to be released on Wednesday. This week’s economic calendar also includes the release of monthly retail sales data and preliminary Michigan consumer sentiment on Friday. All this will influence the short-term price dynamics of the dollar and provide a new directional impulse to the USD/JPY pair. Meanwhile, broader risk sentiment could create short-term opportunities.
USD/JPY technical levels
Source: Fx Street
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