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USD/JPY hits new 24-year highs around 141.00

  • USD/JPY rises for the eighth day in a row as bulls celebrate risk appetite and rising Treasury yields.
  • Stimulus hopes, options expiry and lack of immediate BoJ monetary policy challenges seem to favor buyers.
  • Verbal intervention from Japanese policymakers and reversal of bets from Fed hawks test bullish momentum.
  • Softer Japanese data on household spending and labor cash earnings also strengthened the pair.

USD/JPY bulls flourished in Europe early Tuesday as they hit the highest levels since 1998 after eight consecutive days of uptrend. The pair has risen to 140.97 as it celebrated firm US Treasury yields and market risk-on sentiment.

That said, the 10-year US Treasury yield was up 2.5 basis points (bps) to 3.21% at time of writing. In this way, the coupons of the US benchmark bond reverse Friday’s losses. Intraday gains of 0.50% in S&P 500 Futures, as well as the Dollar Index (DXY) retreat from the previous day’s 20-year high, could also portray risk-on sentiment.

Talk of more aid packages to fuel the economic recovery appears to have favored the optimists during the markets’ high. That said, incoming UK Prime Minister Liz Truss is banking on a £130bn energy plan, while the People’s Bank of China (PBOC) cuts the Reserve Requirement Ratio (RRR). In addition, politicians in Germany and the Eurozone are battling recession woes with a strong push to defend energy companies and stocks for the winter.

Also, softer data out of Japan seems to boost USD/JPY moves. Earlier in the day, Japan’s overall domestic spending fell to 3.4% yoy in July, vs. 4.2% expected and 3.5% previously. In addition, cash labor earnings also fell to 1.8% annually, compared to the 2.5% expected by the market and 2.2% previously.

It is worth noting that the verbal intervention of Japanese policy makers seems not to defend the yen bulls. Recently, Japanese Finance Minister Shunichi Suzuki said on Tuesday that he was under the impression that recent currency movements were becoming more significant.

Multiple option expirations around 140.00, recently around $626m according to Reuters, also keep USD/JPY buyers hopeful. Also helping the pair is the CME’s FedWatch tool, which hints at a 60% chance that the Fed will raise interest rates by 0.75% in September, up from 75% the previous week. The Fed’s easing of bets could be related to the mixed US employment report for August.

Later in the day, the reaction of US and Canadian traders will be closely watched for clear indications. The geopolitical headlines surrounding China, Russia and the United States will also be important. Additionally, the August ISM Services PMI, expected to be 55.5 vs. 56.7 prior, should give USD/JPY traders direction.

USD/JPY Technical Analysis

USD/JPY bulls remain on track for rising resistance line from late April around 144.55 unless sustained beyond July high near 139.40.

USD/JPY

Panorama
Last Price Today 140.87
Today’s Daily Change 0.25
Today’s Daily Change % 0.18
Today’s Daily Opening 140.62
Trends
20 Daily SMA 136.64
50 Daily SMA 136.25
100 Daily SMA 133.47
200 Daily SMA 125.11
levels
Previous Daily High 140.66
Previous Daily Minimum 140.12
Previous Maximum Weekly 140.8
Previous Weekly Minimum 137.57
Monthly Prior Maximum 139.08
Previous Monthly Minimum 130.4
Daily Fibonacci 38.2% 140.45
Daily Fibonacci 61.8% 140.33
Daily Pivot Point S1 140.27
Daily Pivot Point S2 139.92
Daily Pivot Point S3 139.73
Daily Pivot Point R1 140.82
Daily Pivot Point R2 141.01
Daily Pivot Point R3 141.36

Source: Fx Street

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