- USD/JPY gained traction for the second day in a row and rose to a two-week high.
- Hopes of a ceasefire between Russia and Ukraine undermined the safe haven JPY.
- The USD’s modest strength remained supportive ahead of the Russia-Ukraine peace talks.
The pair USD/JPY It maintained its offered tone through the middle of the European session and was last seen trading near the 115.75-115.80 area, or a two-and-a-half week high.
A combination of supportive factors helped the USD/JPY pair capitalize on the previous day’s strong move higher and gain some follow-through traction for the second day in a row. The global flight to traditional safe-haven assets that followed Russia’s invasion of Ukraine last week now appears to have subsided amid hopes of a ceasefire. In fact, Ukraine’s presidential adviser said that the delegation is heading for the second round of talks with Russia, which will start in a couple of hours. This, in turn, weighed on the Japanese yen and acted as a tailwind for the major amid modest US dollar strength.
Fed Chairman Jerome Powell declared on the first day of his testimony to Congress that the US central bank could take tougher action if inflation levels don’t come down. Adding to this, Chicago Fed President Charles Evans said that monetary policy is currently wrong and needs to be adjusted upwards towards neutrality. This, coupled with concerns about the worsening situation in Ukraine, benefited the dollar’s status as a global reserve currency and further widened support for the USD/JPY pair.
That said, a softer tone around US Treasury yields kept USD bulls from making aggressive bets and kept any runaway rally for USD/JPY limited, at least for now. Attention remains on the headlines surrounding the Russia-Ukraine saga, which will play a key role in the direction of the pair.
Technical levels
Source: Fx Street
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