- A combination of factors pushed USD / JPY higher for the second day in a row on Monday.
- Positive risk sentiment weighs on the safe-haven JPY and supports the pair’s upward move.
- The USD benefits from the optimistic expectations of the Fed and provides an additional boost to the pair.
The pair USD / JPY has moved higher at the beginning of the European session Monday and has risen to a week-and-a-half high, around the 114.35 region.
The pair has built on its recovery from two-week lows, around the 113.25-hit region last Thursday and has gained some traction on the first day of a new week. This marks the second consecutive day of positive movement for the USD / JPY pair and is due to a combination of factors.
The victory of Japanese Prime Minister Fumio Kishida in a snap election it raised hopes for additional stimulus and boosted investor sentiment. This was evident from a positive tone around equity markets, which weighed on the safe-haven Japanese yen and offered some support to the USD / JPY pair.
Investors took cues from a modest strength of the US dollar and they did not seem affected by the disappointing release of official Chinese PMI figures over the weekend. The dollar held firm near its two-and-a-half-week highs and was supported by expectations of an early tightening of monetary policies by the Fed.
Data released on Friday showed that The Fed’s Preferred Indicator of Inflation Stable Near 30-Year Highs and they indicated that consumer cost pressures are taking hold. This fueled speculation that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly higher inflation.
Therefore, the market will focus on the outcome of the two-day FOMC monetary policy meeting, starting this Tuesday. The Fed is expected to announce its decision during the American session on Wednesday, which will influence the price dynamics of the dollar and determine the short-term trajectory for the USD / JPY pair.
Meanwhile, Monday’s release of the US ISM Manufacturing PMI could generate some momentum later in the North American session. Aside from this, the broader market risk sentiment should further allow investors to take some short-term opportunities around the USD / JPY pair.
USD / JPY technical levels
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