- Despite falling US Treasury yields, USD/JPY gains 0.27%.
- Aggressive comments from the Fed and dovish rumors from the BoJ lift USD/JPY into positive territory.
- USD/JPY Price Forecast: Could Head for a Downside Correction.
The USD/JPY Posted modest gains early in the American session, hitting highs around 128.69, despite falling US Treasury yields and a risk-off mood in the market. At the time of writing, the USD/JPY is trading at 128.68.
Global equities are taking a hit from market risk aversion, while most global bond yields rise, except in the US. On Thursday, at an IMF panel, Fed Chairman, Powell aligned himself with the hawkish tone led by St. Louis Fed President James Bullard, saying a 50 bps hike “is on the table for the May meeting.” Powell added that the US central bank would not count on supply-side healing to help inflation, implying that the Fed is focused on the demand side.
Elsewhere, James Bullard, president of the St. Louis Fed, admitted that the Fed is behind the curve, but not like everyone thinks, adding that the Fed has raised 75 bps before without the world coming to an end. .
Meanwhile, money market futures have priced in a 100% chance of a 50bp rise at the May and June meetings, while the odds of a 75bp rise remain lower.
Apart from this, Japanese Finance Minister (MoF) Suzuki discussed the possibility of coordinated intervention in currency markets with US Treasury Secretary Janet Yellen, as reported. MoF Suzuki said he discussed the yen’s sharp moves with Yellen and the two agreed to maintain existing currency deals.
Recently, Bank of Japan (BoJ) Governor Haruiko Kuroda said that the economy is not so vulnerable as to need further easing, stressing that until the CPI reaches and remains above 2% on a stable basis, it will continue with your current position.
As for the data, the Japanese docket presented the inflation data, which came in at 1.2% yoy as expected, while the core consumer price index (CPI) was in line with estimates at 0.8% yoy. The S&P Global Flash US Manufacturing PMI came in at 59.7.
USD/JPY Price Forecast: Technical Outlook
Since the middle of the week, USD/JPY has consolidated in the 127.80-129.10 area. The yearly high at 129.10 seems to be holding for now, but the RSI at 79.59 in overbought territory suggests a correction lower is on the cards.
If that scenario plays out, the first USD/JPY support would be the April 20 daily low at 127.45. A break below would expose the April 2001 cycle highs around 126.85, followed by the April 12-day high at 126.31.
To the upside, the first resistance for USD/JPY would be at 129.00. A break of the latter would expose the yearly high at 129.10, followed by the 130.00 line from the sand, expressed by Mr. Yen.
Technical levels
Source: Fx Street
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.
