- A positive risk tone weighs on the safe-haven JPY and offers USD/JPY support.
- Modest USD weakness keeps bulls on the defensive and caps the pair’s uptrend.
- The Fed’s bullish expectations and elevated US bond yields should act as a tailwind for the USD.
- Investors are now turning their attention to US retail sales looking for some momentum ahead of the FOMC meeting minutes.
The pair USD/JPY moves with a slight positive bias early in the European session on Wednesday, consolidating in a range just above the 115.50 region.
Following good price moves in both directions the previous day, the USD/JPY pair rallied on Wednesday and looks set to take advantage of this week’s rebound from the key psychological level of 115.00. Easing fears of a Russia-West conflict over Ukraine continued to support a risk-positive tone.. This, in turn, weighed on the safe-haven Japanese yen and offered some support to the USD/JPY pair.
On the other hand, the US dollar saw limited price action and failed to impress the bulls or provide additional momentum to the USD/JPY pair. Having said that, the prospects for a more rapid tightening of monetary policy by the Fedconfirmed by the high yields of US Treasury bonds, should act as a tailwind for the dollar. This supports the prospects for further upside in the pair.
The markets seem convinced that the Fed would adopt a more aggressive monetary policy to combat stubbornly high inflation and have been eyeing a 50 basis point rate hike in March. Therefore, the focus will remain on the FOMC meeting minutes, which will be released later in the American session today. Investors will be looking for clues as to the pace of the Fed’s tightening cycle, which would influence short-term USD price dynamics.
Meanwhile, monthly US retail sales data coupled with US bond yields will boost USD demand and give the USD/JPY pair some lift. Apart from this, the broader market risk sentiment should allow investors to take advantage of some short-term opportunities.
USD/JPY technical levels
Source: Fx Street
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