- USD/JPY remains trapped in a tight range during the European session.
- The rebound in US bond yields revives demand for the USD and offers support for the pair.
- Less aggressive Fed rate hike expectations could limit the dollar and any significant gains for the pair.
The USD/JPY continues its struggle to gain significant traction and trades in a tight range for the second day in a row on Tuesday. The pair is currently around the 132.00 levelvirtually unchanged on the day, and is influenced by a combination of factors.
The US dollar halts its recent slide and regains some positive traction, which in turn is seen as a key factor supporting the USD/JPY pair. A modest rebound in US Treasury yields acts as a tailwind for the USD amid some repositioning trades ahead of the Fed Chairman’s speech, Jerome Powell, later during today’s American session. Investors will look for clues on the pace of the Fed’s rate hikes in upcoming meetings. This will influence the demand for the USD and provide a significant boost to the pair.
Meanwhile, the increased expectations for relatively minor rate hikes by the US central bank. it should cap any further rise in US bond and dollar yields. Aside from this, a softer risk tone could benefit the safe-haven JPY and help cap the USD/JPY pair. Despite the fact that China has abandoned its strict zero-covid policy, fears of a recession weigh on investor sentiment. This, along with the speculation that the Bank of Japan will end up phasing out its ultra-loose policyjustifies the caution of the bulls.
No major economic data that could influence markets will be released in the US on Tuesday. Therefore, attention will remain focused on Powell’s speech, which, coupled with US bond yields, could boost the dollar and give USD/JPY a bit of a lift. Apart from this, the risk sentiment of the broader market will be taken into account to take advantage of some short-term opportunities around the pair. The fundamental background, meanwhile, favors bears and supports prospects for an extension of the recent slide from highs of more than three decades.
USD/JPY 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.
