USD/JPY oscillates in a range around 135.00, with upside potential intact

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  • USD/JPY oscillates between tepid gains and small losses during the early American session.
  • The political divergence between the Fed and the Bank of Japan continues to undermine the yen and offers support to the pair.
  • The pullback in US bond yields appears to act as a dollar headwind and limits any significant gains.

The pair USD/JPY struggles to capitalize on gains posted in the last two sessions and finds itself somewhat bid ahead of the 135.50 area. The pair falls to a fresh daily low during the early American session, though it quickly bounces back towards the key psychological 135.00 level.

A wide divergence in the monetary policy stance adopted by the Bank of Japan and the Federal Reserve continues to undermine the Japanese yen, which, in turn, acts as a tailwind for the USD/JPY pair. Indeed, the Bank of Japan has repeatedly stated that it will maintain its ultra-soft policy setting. In contrast, the Fed is expected to maintain its monetary policy tightening path despite signs of easing in US inflation.

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The July 26-27 FOMC Meeting Minutes reaffirmed these bets, indicating that policymakers would not consider withdrawing rate hikes until inflation subsided substantially. Aside from this, better-than-expected macroeconomic releases from the US helped keep the dollar close to the monthly low. This is another factor supporting the USD/JPY pair.

Data released on Thursday showed the Philadelphia Fed manufacturing index rose to 6.2 in August, beating consensus estimates of an improvement to -5 from -12.3 reported in the previous month. Meanwhile, US initial jobless claims unexpectedly fell to 250,000 during the week ended August 12, from the previous week’s downwardly revised reading of 252,000 (262,000 previously reported).

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That said, the pullback in US Treasury yields seems to be holding back dollar bulls from making aggressive bets and limiting USD/JPY’s gains, at least for now. Nonetheless, the fundamental backdrop supports the prospects for a further short-term appreciation move for the USD/JPY pair, suggesting that any significant decline could be seen as a buying opportunity and remain limited.

Technical levels

USD/JPY

Panorama
Last Price Today 135.01
Today’s Daily Change -0.02
Today’s Daily Change % -0.01
Today’s Daily Opening 135.03
Trends
20 Daily SMA 134.49
50 Daily SMA 135.4
100 Daily SMA 131.69
200 Daily SMA 123.57
levels
Previous Daily High 135.5
Previous Daily Minimum 133.91
Previous Maximum Weekly 135.58
Previous Weekly Minimum 131.73
Monthly Prior Maximum 139.39
Previous Monthly Minimum 132.5
Daily Fibonacci 38.2% 134.89
Daily Fibonacci 61.8% 134.52
Daily Pivot Point S1 134.12
Daily Pivot Point S2 133.22
Daily Pivot Point S3 132.53
Daily Pivot Point R1 135.72
Daily Pivot Point R2 136.4
Daily Pivot Point R3 137.31

Source: Fx Street

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