- USD/JPY is witnessing some intraday selling amid a shift in risk sentiment.
- A modest rise in USD demand offers support and helps limit the pair’s decline.
- The focus remains on the ceasefire talks between Russia and Ukraine and the US CPI report.
The pair USD/JPY has given back a significant portion of its intraday gains to a one-month high at 116.19 and has pulled back to the 115.85 area during the first half of the European session on Thursday.
Initial optimism about the possibility of a diplomatic resolution to end the war in Ukraine faded fairly quickly amid news that Russian troops have seized parts of Mariupol. The change in risk sentiment was evident by a sharp drop in equity markets. This, in turn, fueled some safe haven flows into the Japanese Yen and put downward pressure on the USD/JPY pair.
The strong market reaction suggests that investors remain concerned about the risk of a further escalation of tensions between Russia and the West. It is worth remembering that the president of the United States, Joe Biden imposed an immediate ban on Russian oil on Tuesday and other energy imports. Britain matched the move, saying it would phase out Russian oil imports by the end of 2022.
On the other hand, the European Union (EU) also announced new sanctions against Russian individuals and Belarusian banks. The Russian Foreign Ministry said that the response to Western sanctions will be sensitive and precise. In addition, the UK Parliamentary Under-Secretary of State for the Armed Forces, James Stephen Heappey, warned of NATO intervention if Russia uses chemical weapons.
That said, the appearance of some buying around the USD offered some support to the USD/JPY pair and helped limit the decline, at least for now. Investors also seemed reluctant, preferring to wait for incoming news of ceasefire talks between Russia and Ukraine in Turkey. Aside from this, investors will take cues from the release of the latest US consumer inflation figures.
USD/JPY technical levels
Source: Fx Street
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