- A combination of factors triggered a modest USD / JPY pullback on Wednesday from a multi-year high.
- JPY benefited from revival in demand for safe havens; the decline in US bond yields weighed on the USD.
- A surprisingly stronger ADP report, aggressive expectations from the Fed limited losses for the USD and for the pair.
The pair USD/JPY it maintained its offered tone during the early days of the American session, although it has managed to bounce a few pips from the daily low. The pair was last seen trading just below 116.00 and had a rather subdued reaction to upbeat US macroeconomic data.
Automatic Data Processing (ADP) reported that US private sector employers added 807,000 jobs in December, compared to consensus estimates that point to a reading of 400,000. However, the prior month’s reading was revised lower to 505,000 from 534,000 and did little to provide a significant boost to the US dollar, which was hit by falling US Treasury yields.
Apart from this, the cautious mood around the equity markets held the Japanese yen as a safe haven and was seen as another factor that put some downward pressure on the USD / JPY pair. That said, expectations of a faster policy tightening by the Fed continued to act as a tailwind for the dollar and helped limit any further losses for the pair, at least for the time being.
In fact, money markets have fully priced in an eventual takeoff by the Fed in May and two more rate hikes by the end of 2022. Therefore, the focus will remain on the minutes of the FOMC’s monetary policy meeting, which will be held. will be released later during the US session. This, in turn, justifies caution before confirming that the recent rally in USD / JPY to a five-year high has been exhausted.
Even from a technical perspective, the strong overnight move validated a short-term bullish breakout through a month-old uptrend channel resistance. Given the constructive setup, the ongoing decline could still be classified as a corrective pullback and could still be seen as a buying opportunity near the previous high, around the 115.50 region.
Technical levels
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
