USD/JPY flat lines above the mid-134.00s as it consolidates recent gains to a multi-week high.
FUNDAMENTAL OVERVIEW
- Near a multi-week high reached on Wednesday, USD/JPY oscillates inside a small trading band.
- The safe-haven JPY gains from the risk-off impetus, which also serves as a headwind when the USD weakens.
- Bets on additional Fed rate hikes serve to restrict USD losses and provide some support for the pair.
Throughout the first part of the European session, the USD/JPY pair oscillates between tepid gains and modest losses due to the lack of a consistent intraday directional trend on Thursday. The pair is currently trading in the 134.65 area, close below the five-week high reached on Wednesday and is being influenced by several opposing factors.
The Japanese Yen (JPY) gains from a new wave of the global risk-aversion trade that increases demand for classic safe-haven assets. Aside from this, the USD/JPY pair faces a little decline in the US Dollar (USD), which is being driven by a continuing decline in US Treasury bond yields from a nearly one-month peak reached on Thursday. The US-Japan rate disparity narrows because of an intraday decrease in US bond yields, further supporting the JPY.
Nevertheless, the likelihood of more Federal Reserve (Fed) policy tightening should help restrict the decline in US bond yields and reward those who are bullish on the US dollar. In fact, the markets have completely priced in a 25-basis point (bps) lift-off in May and appear to be confident that the Fed will keep hiking interest rates. In addition, the Fed funds futures suggest a slight possibility of a second-rate increase at the June FOMC meeting in response to recent hawkish remarks by Fed members.
Now that the Philly Fed Manufacturing Index and Existing Home Sales data have been released, market participants are turning their attention to the US economic calendar, which includes the typical Weekly Initial Jobless Claims, Existing Home Sales, and the Philly Fed Manufacturing Index. This will fuel the USD demand and give the USD/JPY pair some momentum, along with statements by significant FOMC members and the US bond yields. To seize short-term chances, traders will also take cues from the general risk sentiment.
USD/JPY TECHNICAL ANALYSIS DAILY CHART:
Technical Overview
USD/JPY is currently trading in up channel.
USD/JPY is currently trading above all SMA.
RSI is in buying zone which suggests bullishness and Stochastic is suggesting no trend.
USD/JPY resistance is at 134.712 & its immediate support level is 134.093
HOW TO TRADE USD/JPY
The USD/JPY pair is heading upwards. It is currently trading at a significant resistance level; if it can break through it and hold it, USD/JPY may trade further to the upside.
