- USD / JPY gains positive traction for the second day in a row on Wednesday.
- The rally does not appear to be affected by the decline in US bond yields and a weaker USD.
- Even a softer risk appetite tone does not benefit the safe haven JPY or hinder the pair’s upward momentum.
The pair USD/JPY maintains its firm upward tone at the start of the European session on Wednesday, staying near two-day highs around the 105.50 region.
The pair has built on the good bounce of the previous day, from below the key psychological level of 105.00, and has gained positive traction for the second day in a row on Wednesday. The rally has lacked an obvious fundamental catalyst and has even appeared unaffected by a combination of negative factors.
During the first day of his semi-annual testimony before Congress, the Fed Chairman, Jerome Powell reiterated a very pessimistic political stance on Tuesday and caused a modest pullback in US Treasury yields Powell said interest rates will remain low and the Fed will continue to buy bonds to support America’s economic recovery.
Pullback in bond yields has kept US dollar bulls on the defensive during the first half of trading action on Wednesday, though it has done little to hinder the positive intraday movement of the USD / JPY pair. The bulls have even ignored a softer tone in the stock markets, which tends to benefit the safe haven Japanese yen.
In the meantime, the impressive rate of COVID-19 vaccination and progress on a massive U.S. fiscal spending plan have continued to fuel hopes for a strong recovery world economy. In fact, House Majority Leader Steny Hoyer has said a vote will take place on Friday on the $ 1.9 trillion stimulus package proposed by US President Joe Biden.
This has appeared to be the only factor driving the USD / JPY higher, although the rise is likely to remain limited amid the absence of relevant economic releases. This makes it prudent to wait for a strong continuation buy before positioning for any further bullish movement back towards the round 106.00 level.
USD / JPY technical levels
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