- USD/JPY gains strong positive traction on Monday and is supported by a combination of factors.
- Risk-off momentum and the widening of the US-Japan rate differential weigh on and support the yen.
- The less hawkish outlook from the Fed keeps USD bulls on the back foot and could limit gains.
He USD/JPY It is supported by the good recovery on Friday from the 129.65 zone, or its lowest level since February 3, and gains traction on the first day of a new week. The positive momentum has pushed the pair up over 100 pips today, rising from the 130.49 Asian session low to a new two-day high at 131.56 at European noon.
The generally positive tone around equity markets weakens the Japanese yen (JPY), which is seen as a safe haven. The news that First Citizens Bank & Trust Company will buy all of Silicon Valley Bank’s deposits and loans from the Federal Deposit Insurance Corporation (FDIC) calms market nerves about the risk of contagion. In addition, reports that the US authorities were in the early stages of deliberation about expanding emergency lending facilities boost investor appetite for assets perceived to be riskier.
The flow of risk appetite, together with the easing of fears of a full-blown banking crisis, prompt a further recovery in US Treasury yields. This translates into a widening of the US-Japan rate differential, being considered another factor weighing on the yen and providing an additional boost to the USD/JPY pair. That being said, the signal from the Federal Reserve that it may soon pause the rate hike cycle in the wake of recent turmoil in the banking sector puts a damper on further bets by US dollar (USD) bulls. This, in turn, could stop any significant appreciation move in the US currency.
It should be remembered that the US central bank raised interest rates by 25 basis points on Wednesday, as expected, although it was cautious about the outlook. Apart from this, expectations that the Bank of Japan (BoJ) will modify its bond yield control policy and reduce its massive stimulus under new Governor Kazuo Ueda could help limit the pair’s gains. Therefore, it would be prudent to wait for follow-through buying before confirming that the recent decline in rejection from a technically significant 200-day SMA has run its course.
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.
