- USD / JPY is at seven-month highs near 107.00 and appears poised for a fifth straight day of gains.
- Risk appetite, central bank divergence and strong US data are cited as bullish factors.
Another day, more hike for him USD/JPY. The pair, which is currently trading at seven-month highs not far from the 107.00 level and is up 0.3% or just over 30 pips on the day, is set for its fifth consecutive day of gains. After rising 1.4% in January and then 1.8% in February to rise from yearly lows below 103.00 to current levels not far from the 107.00 level, the USD / JPY rally looks set to continue without an end to the view, technically speaking. The August 2020 highs around the 107.00 level will offer some resistance, but a breakout beyond this area will open the door for a further rise this month towards 108.00.
Performance of the day
USD / JPY is getting headwinds from a few separate factors on the first trading day of the month; Although US bond yields show mixed price action (short-term yields have declined and long-term yields have risen on an unusual slope of the Treasury curve), the calmest price action in the US markets. bonds has eased the nerves in the market in general. As equity investors are no longer so concerned about rising returns, attention has turned to the positive macro environment and global equities have risen on Monday with a focus on; 1) Congress is getting closer to passing US President Joe Biden’s 1.9 T stimulus package (the House voted in favor of the bill on Friday and now goes to the Senate), 2) Johnson’s Covid-19 vaccine & Johnson has just received USA in the USA, which means that the launch of the vaccine in the country will now accelerate even more and 3) the drop in global rates of Covid-19 infection and a general trend towards the relaxation of the lockdown (including in the US and Japan), commodities and risk-sensitive currencies are doing better. Amid risk appetite, the safe-haven JPY is out of favor.
Meanwhile, the central bank divergence also appears to be working in favor of USD / JPY; Bank of Japan sources told newswires this morning that the bank is prepared to defend its 0.0% yield target for the Japanese 10-year government bond, and the bank is said to intend not to allow yields to 10 years exceed 0.3% under any circumstances. The BoJ’s policy of actively intervening in the bond markets to avoid any spike in bond yields stands in stark contrast to the message coming from the Fed; Thomas Barkin, a member of the FOMC, spoke on Monday about how not only is he not concerned about rising yields, but the Fed would be genuinely disappointed not to see yields rise when economic conditions improve (a type of statement that it would be unimaginable from the BoJ). Barkin’s lack of concern about the recent surge in US bond yields reflects similar sentiments expressed by other FOMC politicians, including Chairman Jerome Powell, Vice Chairman Richard Clarida, and influential New York Fed Chairman. FOMC member John Williams. Powell will speak again later in the week and is expected to reiterate his lack of concern.
Finally, a February Very Strong / Highly Inflationary US ISM Manufacturing PMI Survey could also be adding more reasons for market participants to go long USD / JPY; The ISM Manufacturing PMI core figure beat expectations by 60.8 (58.8 expected), its highest level since September 2018. The employment sub-index rose to 54.4, a good omen for the official US labor market report of this week. New orders rose to 64.8 from 61.1, in a sign of strong demand going forward. But the Prices Paid sub-index soared higher to 86.0, its highest level since 2008. According to Capital Economics, “higher oil prices and the depreciation of the dollar are putting some upward pressure on US prices. This time too, but the scale of the increase in the ISM price paid index goes far beyond what can be explained solely by those factors. ”The economic consultancy goes on to say that“ the comments in the report also make it clear that this shortage it goes well beyond semiconductors, and companies in all industries report shortages and problems with suppliers to meet demand. “
Technical levels
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