- The USD/JPY pair is trading in a narrow trading band just below the yearly high reached on Tuesday.
- A modest USD pullback from two-month highs and a softer risk tone cap gains for the pair.
- The divergence between Fed and BOJ policies continues to act as a tailwind ahead of the FOMC Minutes.
The pair USD/JPY extends its sideways price consolidation move for the second day in a row and remains range bound early into the Wednesday session. The pair is currently sitting just below 138.50 and remains a safe distance from the previous day’s high.
The US Dollar (USD) pulls back after an early rally to a fresh two-month high amid a fresh dip in US Treasury yields. Aside from this, a generally tone Weaker around equity markets drives some safe haven flows into the Japanese yen (JPY) and acts as a headwind for the USD/JPY pair. Against a background of concern about the slowdown in the global economy, the lack of progress in talks on raising the US debt ceiling dampens investor appetite for riskier assets and benefits traditional safe-haven assets.
The dollar’s slide, meanwhile, appears dampened by increasingly firm expectations that the US central bank will keep interest rates higher for longer, bolstered by recent hawkish comments from a number of Fed officials. Federal (Fed). In fact, markets have been pricing in the possibility of another 25 basis point rise in June. This marks a large divergence from the more dovish stance taken by the Bank of Japan (BOJ), which continues to weaken the Yen and is seen as providing some support to the USD/JPY pair.
Traders also seem reluctant to make aggressive bets, preferring to wait on the sidelines before the FOMC meeting minutes are released later in the US session. The Minutes will be closely watched for clues on the Fed’s future rate hike path, which will play a key role in influencing USD price dynamics and providing further directional momentum to the USD/JPY pair. However, the aforementioned fundamental undercurrent favors the bulls and suggests that the path of least resistance for spot prices is to the upside.
technical levels
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.
