- USD/JPY is gaining ground for the fifth day in a row and hits a two-week high on Wednesday.
- Dovish Fed expectations drive the dollar to a nearly two-month high and benefit the pair.
- The fundamental undercurrent favors the bulls and supports the prospects for further appreciation.
The pair USD/JPY moves higher for the fifth day in a row on Wednesday and reaches highs of more than two weeks during the first hours of the European session. The pair is currently trading around the 137.00 levelas bulls now wait for a move beyond the 200-day SMA before opening new positions.
The US dollar (USD) continues to receive support from recent hawkish comments from several Federal Reserve officials (Fed) and rises to a nearly two-month high, which in turn is seen as a key factor acting as a tailwind for the USD/JPY pair. Cleveland Fed President Loretta Mester, stated on Tuesday that interest rates are not at a restrictive enough level and that the central bank is not yet at the point of holding rates. This, in turn, reinforces market expectations that the US central bank will keep interest rates higher for longer and provides a nice boost to the dollar.
The Japanese Yen (JPY), for its part, is weighed down by the more dovish stance taken by the Bank of Japan (Boxwood). It is worth remembering that the Governor of the BoJ, Kazuo Ueda said last week that it was too early to discuss specific plans for an exit from the massive stimulus program.. This, coupled with a modest rally in US equity futures, weighs on the safe-haven Japanese Yen (JPY) and remains supportive of the current positive move in the USD/JPY pair. That being said, a modest drop in US Treasury yields could stop bulls from taking aggressive positions.
However, the aforementioned fundamental background suggests that the path of least resistance for USD/JPY is to the upside. Therefore, further strengthening towards a test of the monthly high, near the region of 137.75-137.80It seems like a clear possibility. Some continuation purchases above the annual maximum, around the zone of 137.90 touched in March, they will signal a new bullish breakout and pave the way for a new appreciation move. Traders expect US housing market data (building permits and housing starts) to provide further impetus.
USD/JPY technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
