- USD/JPY consolidates below six-year highs of 119.40 as markets turn cautious.
- The divergence between the Fed and the BoJ and the crisis in Ukraine remain the underlying factors influencing the pair.
- The rising wedge resistance on the 4hr chart at 119.52 remains a tough nut to crack.
The USD/JPY pair is trading sideways below six-year highs of 119.40 hit last Friday as markets remain cautious amid renewed tensions in Ukraine and a hawkish Fed.
US Treasury yields are extending the earlier bounce as Fed officials suggest a 0.50% rate hike in May, supporting the US dollar. This, in turn, supports the fall of the pair.
Meanwhile, the USD is also finding support from the intensifying Ukraine-Russia crisis, with the Kremlin now stating that progress in the Ukraine talks is “less than we would like”.
Looking ahead, US President Joe Biden’s meeting with NATO leaders will be closely watched later this Monday. Fed Chairman Jerome Powell’s speech will also take center stage, while the monetary policy divergence between the Fed and the BoJ will continue to weigh on the Japanese yen.
The USD/JPY 4-hour chart shows that the price lacks momentum to the upside at the moment.
However, with the RSI testing overbought territory, there is some room to move higher in the currency pair.
Therefore, the overhead resistance of a week-old rising wedge at 119.52 remains on the bulls’ table as the pair receives a fresh wave of buying.
A sustained move above this latter region will point to a test of the 120.00 round level.
USD/JPY 4 hour chart
If the pair faces rejection at the wedge resistance, the price could turn towards the ascending support at 118.95, below which the 21-period moving average at 118.82 will be targeted.
A daily close below this level will confirm the breakout of the bearish wedge, opening the door for a further correction towards the 50 SMA at 117.82.
The last line of defense for buyers is at the lows of March 15 at 117.69.
USD/JPY additional levels
Source: Fx Street
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