USD/JPY bulls hold firm as US stocks close higher

• USD/JPY held firm despite US dollar weakness and increased risk appetite.
• The Fed chairman did not add anything new in his interview with the WSJ and risk appetite recovered on Wall Street.

At 129.34, the USD/JPY up 0.18% at the close on Wall Street. Risk appetite increased on Tuesday as April industrial production and retail sales grew more than expected, indicating the strength of the economy, which somewhat helped the US dollar against the safe-haven yen. .

Reflecting the good market mood, the S&P 500 and the Dow advanced 2.0% and 1.3%, respectively, while the tech-heavy Nasdaq soared 2.8%. In addition to the yen, however, the dollar fell for the third day in a row on Tuesday against a basket of currencies. The USD pulled back from its two-decade highs against a basket of major currencies as increased investor appetite for riskier bets diminished the appeal of the US currency. The 10-year dollar yield rose 10.5 basis points to 2.98%.

The US Dollar Index (DXY), which tracks the USD against six major currencies, fell 0.84% ​​to 103.226, a May 6 low. The index hit a two-decade high last week on the back of a hawkish Federal Reserve and concerns about the global economy.

Fed Chairman Jerome Powell, at a Wall Street Journal event, vowed to “keep pushing” until it is clear that the current wave of inflation is coming down, but this failed to keep risk down for long and equities rallied at the close to hit new highs.

As for the data, retail sales and industrial production provided a dose of optimism to market participants, who fear that the expected series of 50 basis point interest rate hikes could drag the economy into recession.

Furthermore, reports that Chinese authorities are preparing to ease COVID-19 restrictions allayed concerns about risks to supply chains and weakening Chinese demand, which are expected to continue to weigh on the global outlook.

Technical levels