USD/JPY maintains gains near weekly highs around 144.75-80 zone

• USD/JPY regains positive traction on Thursday amid fresh buying around the dollar.
• The rebound in US bond yields and the expectations of an aggressive rate hike by the Fed revive the demand for the dollar.
• Risk aversion offers some support to the safe haven JPY and seems to limit the pair.
• The divergence between the Fed and Bank of Japan policies favors the bulls and supports the prospects for additional gains.

The pair USD/JPY regains some positive traction on Thursday and is trading near the upper end of the three-day rangearound the 144.80 region during the first half of the European session.

The US dollar returns to the charge and reverses some of the previous day’s sharp decline from two-decade highs, which in turn offers support to the USD/JPY pair. After the spectacular change of course the day before, a further rise in US Treasury yields.bolstered by Fed expectations, helps revive demand for the dollar.

Investors seem convinced that the US central bank will tighten its monetary policy at a faster pace to curb persistently high inflation. This marks a large divergence compared to the more dovish stance taken by the Bank of Japanwhich continues to weigh on the Japanese yen and further contributes to intraday buying around the USD/JPY pair.

It is worth mentioning that the Japanese central bank has lagged behind other major central banks in the process of policy normalization and remains committed to continuing its monetary easing. In addition, a government spokesman said Thursday that Japan is willing to take more steps to ease the pain of rising electricity bills.

That said, the momentum of risk aversion, represented by a sea of ​​red on global stock markets, appears to be lending some support to the safe-haven Japanese yen. This, in turn, is preventing traders from opening new bullish positions around the USD/JPY pair. However, the fundamental background suggests that the path of least resistance is to the upside.

Market participants are now awaiting the US economic docket, in which the final report on GDP for the second quarter and the usual weekly data on initial jobless claims will be released. This, along with speeches from influential FOMC members and US bond yields, will boost the dollar. Aside from this, the overall market risk-off sentiment should give the USD/JPY pair some lift.

USD/JPY technical levels