- USD/JPY gains positive traction for the second day in a row and approaches weekly high.
- Widening US-Japan yield spread and boosting risk appetite undermine safe haven JPY.
- The bulls appear to be waiting for sustained strength beyond 134.00 before making further bets.
The pair USD/JPY receives fresh offers near the 132.30-132.25 zone and is again close to the weekly highs marked this Wednesday. The pair is currently trading around the 133.65-133.70 area, up nearly 0.40% on the day, and is supported by a combination of factors.
A further rise in US Treasury yields, bolstered by overnight comments from several Fed officials, widens the US-Japan rate spread. This, coupled with the risk boost, undermines the safe haven of the Japanese yen and sends USD/JPY higher for the second day in a row.
Broadly speaking, the sharp post-FOMC decline was halted on Tuesday near the confluence support of 130.40-130.35. The mentioned zone comprises the 100-day SMA and the 50% Fibonacci retracement level of the April-July rally, which should now act as a key point for the USD/JPY pair.
The bulls, meanwhile, could wait for buying beyond 134.00 before positioning for further gains. The USD/JPY pair could then rally to the intermediate barrier of 134.75 on its way to the key psychological level of 135.00 and the 23.6% Fibonacci level around the 135.15 area.
On the other hand, the 38.2% Fibonacci around the 132.50 area seems to protect the immediate downside ahead of the 132.00 round figure and the 131.65-131.60 region. If such support levels are not defended, the USD/JPY pair could drop back below 131.00.
The bearish trajectory could extend further towards the 130.40-130.35 confluence support. A convincing break below the latter would be seen as a new trigger for the bears and set the stage for an extension of the recent corrective decline from the 24-year high hit on July 14.
USD/JPY daily chart
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Technical levels
Source: Fx Street
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