- USD/JPY moves higher on Friday and hits fresh two-week highs.
- The recent recovery in risk appetite weighs on the JPY and provides some support for the pair.
- Rising US bond yields reignite demand for the USD and drive the pair higher.
- The focus is on the US core PCE price index.
The pair USD/JPY recovers positive traction on the last day of the week and maintains its buying tone close to a two-week high, around the 133.50 level during the first part of the European session.
The recent recovery of Risk Appetite in Global Stock Markets Weakens Japanese Yen (JPY) from the safe haven, which, along with the appearance of some buying around the US dollar (USD), acts as a tailwind for the USD/JPY pair. Investors now seem convinced that a widespread banking crisis could have been avoided. Apart from this, the hopes of Strong economic recovery in China further boosts investor confidence. Indeed, official Chinese PMI data showed that business activity in the service sector grew in March at its fastest pace in 12 years. Meanwhile, growth in the manufacturing sector moderated somewhat during the reported month, albeit at a slower-than-expected pace.
Besides, The dollar was supported by a slight rebound in US Treasury yields, fueled by renewed speculation that the Federal Reserve (Fed) could raise interest rates again to combat inflation. Besides, three Fed officials on Thursday backed the need for further rate hikes to reduce high levels of inflation. The US central bank, however, it had recently signaled that it could soon pause the cycle of rate hikes due to the turmoil in the banking sector. This, in turn, could act as a headwind for the USD/JPY pair.
Traders also seem reluctant to open aggressive positions and may prefer to stay on the sidelines ahead of the release of the US Core PCE Price Index, the Fed’s preferred inflation gauge, later in the American session. Data will play a key role in influencing market expectations for the future path of rate hikes, which in turn will boost demand for the dollar and provide further directional momentum to the USD/JPY pair. However, the pair remains on track to post strong weekly gains for the first time in the last five.
USD/JPY technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
