- USD/JPY regains positive traction on Thursday amid the emergence of fresh USD buying.
- A pickup in the US bond yields and aggressive Fed rate hike bets revives the USD demand.
- The risk-off impulse offers some support to the safe-haven JPY and seems to cap the pair.
- The Fed-BoJ policy divergence favours bulls and supports prospects for additional gains.
The USD/JPY pair regains some positive traction on Thursday and trades near the top end of a three-day-old trading range, around the 144.80 region through the first half of the European session.
The US dollar makes a solid comeback and reverses a part of the overnight sharp retracement slide from a two-decade high, which, in turn, is seen offering support to the USD/JPY pair. Following the previous day's dramatic turnaround, a fresh leg up in the US Treasury bond yields, bolstered by hawkish Fed expectations, helps revive the USD demand.
Investors seem convinced that the US central bank will tighten its monetary policy at a faster pace to curb persistently high inflation. This marks a big divergence in comparison to a more dovish stance adopted by the Bank of Japan, which continues to undermine the Japanese yen and further contributes to intraday buying around the USD/JPY pair.
It is worth mentioning that the Japanese central bank has been lagging behind other major central banks in the process of policy normalisation and remains committed to continuing with its monetary easing. Moreover, a government spokesperson signalled on Thursday that Japan is ready to take more steps to ease the pain from the rising electricity bills.
That said, the risk-off impulse, as depicted by a sea of red across the global equity markets, seems to be lending some support to the safe-haven JPY. This, in turn, is holding back traders from placing fresh bullish bets around the USD/JPY pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the upside.
Market participants now look forward to the US economic docket, featuring the release of the final Q2 GDP report and the usual Weekly Initial Jobless Claims data. This, along with speeches by influential FOMC members and the US bond yields, will drive the USD. Apart from this, the broader market risk sentiment should provide some impetus to the USD/JPY pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD: The hunt for the 0.7000 hurdle
AUD/USD quickly left behind Wednesday’s strong pullback and rose markedly past the 0.6900 barrier on Thursday, boosted by news of fresh stimulus in China as well as renewed weakness in the US Dollar.
EUR/USD refocuses its attention to 1.1200 and above
Rising appetite for the risk-associated assets, the offered stance in the Greenback and Chinese stimulus all contributed to the resurgence of the upside momentum in EUR/USD, which managed to retest the 1.1190 zone on Thursday.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Bitcoin displays bullish signals amid supportive macroeconomic developments and growing institutional demand
Bitcoin (BTC) trades slightly up, around $64,000 on Thursday, following a rejection from the upper consolidation level of $64,700 the previous day. BTC’s price has been consolidating between $62,000 and $64,700 for the past week.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.