- USD/JPY continued to rise on Thursday and reached the highest level since December 2015.
- Diverging monetary policy outlooks from the Fed and BoJ weighed on the JPY amid a positive risk tone.
- Rising US bond yields supported the USD and continued to support the strong move higher.
The pair USD/JPY maintained its strong tone offered during the early American session and rallied to a fresh multi-year high, closer to the round 122.00 level in the last hour.
A combination of supportive factors helped the USD/JPY pair build on this week’s breakout momentum through the psychological 120.00 level and scale higher for a fifth day in a row on Thursday. A generally positive risk tone undermined the safe-haven Japanese yen, which was further weighed down by the divergence between the Bank of Japan and the Fed’s monetary policy outlook.
In fact, a host of influential FOMC members, including Fed Chairman Jerome Powell, have raised the possibility of a 50bp rate hike at the next policy meeting in May. This, coupled with concerns that rising crude prices would put upward pressure on already high inflation, sent the benchmark 10-year US government bond yield back near the all-time high. since 2019.
By contrast, the Japanese 10-year bond yield remained anchored below the BoJ’s 0.25% ceiling amid the ultra-loose policy stance taken by the Japanese central bank. This, in turn, resulted in a further widening of the US and Japanese bond yield spread, which was seen as another factor driving away flows from the Japanese yen and contributing to the strong bullish trajectory of the USD/JPY pair. .
The relentless rally witnessed over the last three weeks, adding gains of almost 700 pips, has lifted spot prices to levels not seen since December 2015. However, it remains to be seen whether the bulls are able to maintain their dominant position or opt for taking some profit off the table amid extreme overbought conditions on short-term charts.
On the economic data front, US Durable Goods Orders disappointed market expectations, although this was offset by a larger-than-anticipated drop in weekly initial jobless claims. As the focus remains glued to new developments surrounding the Russia-Ukraine saga, the mixed numbers did little to provide any significant lift to the USD/JPY pair.
Technical levels
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
