USD / JPY, capped above 113.00, bounces higher towards 113.50

• The dollar remains near three-year highs at 113.80, backed above 113.00.
• The Japanese yen rises after a four-day downtrend.
• The USD / JPY rally is heading for 120.00 – ING.

The USD it is regaining some ground against the Japanese yen in the US trading session on Wednesday. The pair’s reversal from three-year highs at 113.80 found support at 113.25, before climbing to 113.45.

The yen rises against a weaker US dollar

The Japanese yen appreciated earlier on Wednesday, supported by a somewhat weaker dollar, on the back of a flattening US yield curve. The yield on the 10-year bond has fallen to 1.57% after peaking at 1.61% on Tuesday, while the 2-year yield has risen to 18-month highs at 0.36%.

Furthermore, the US macroeconomic calendar has confirmed the inflationary pressures that threaten the economic recovery. US consumer prices accelerated to a monthly rate of 0.4% and 5.4% year-on-year in September, from 0.3% and 5.3% respectively in September.

These figures challenge Fed Powell’s theory of “temporary” high inflation and reinforce expectations that the Federal Reserve may announce the rollback of its massive monetary stimulus program in November.

USD / JPY: Seen rebounding towards 120.00 – ING

However, according to ING’s currency analysis team, the USD rally is far from over. They expect the pair to reach prices at 120.00: “Pressure is building for an upside breakout in USD / JPY. We believe that the macroeconomic / US Fed story will be positive for the dollar over the next 15 months (USD / JPY will trade at 120), while the local evolution seems slightly bearish in the JPY ”.

Technical levels