USD / JPY remains stable near a week-long high, comfortably above 113.50

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  • USD / JPY rose to 1-week highs on Tuesday and was supported by a combination of factors.
  • Risk appetite undermined the safe haven JPY and extended some support to the pair.
  • Rising bets on rate hikes from the Fed, the recovery in US bond yields benefited the USD and continued to act as supportive.

The pair USD/JPY It traded on a positive bias during the early days of the US session and was last seen trading in the 113.65-70 region, or a one-week high set earlier this Tuesday.

A combination of support factors helped the USD / JPY to take advantage of the positive movement of the previous day and gain some traction for the second day in a row on Tuesday. The easing of concerns about the economic consequences of the new Omicron variant continued to support the prevailing risk appetite environment. This, in turn, undermined the safe-haven Japanese yen and acted as a tailwind for the pair.

On the other hand, the US dollar got some support from growing bets for a faster take-off by the Fed and a greater recovery in US Treasury yields. Indeed, markets have been weighing the possibility of an eventual Fed rate hike in May 2022 amid concerns about stubbornly high inflation. This provided an additional boost to the USD / JPY pair, although the rally lacked strong bullish conviction.

The fundamental backdrop appears to be tilted in favor of bullish traders, although the lack of tracking buying warrants some caution before positioning for any further appreciation moves. In the absence of major economic releases to move the market, US bond yields would play a key role in influencing USD price dynamics. Other than this, the broader market risk sentiment should give the USD / JPY some boost.

Technical levels

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