- USD / JPY gains some positive traction on Wednesday and breaks a four-day losing streak.
- A good rally in US bond yields eases downward pressure on the USD and offers some support for the pair.
- Risk-off sentiment could benefit the safe-haven JPY and limit the pair’s rally ahead of the FOMC minutes.
The pair USD/JPY moves higher during the European session on Wednesday, climbing back above the 109.00 level. At the time of writing, the pair is reaching fresh daily highs above the 109.10 level.
Having defended the support of an ascending channel for almost a month, the pair has gained some positive traction on Wednesday and has now recovered a significant part of the losses the previous day. The US dollar has reversed an initial slide to the lowest level since January amid a good recovery in US Treasury yields.. This, in turn, has been seen as a key factor that has helped the USD / JPY pair to break four consecutive days of losing streak.
Having said that, expectations that the Fed will keep interest rates low for a longer period could continue to act as a headwind for the dollar. This, coupled with a sharp pullback in equity markets, could offer some support for the Japanese yen as a safe haven and limit the rise in the USD / JPY pair. Investors could also refrain from opening aggressive positions ahead of Wednesday’s release of the minutes of the FOMC’s monetary policy meeting.
Even from a technical perspective, the bulls appeared to be struggling to capitalize on the positive intraday move above the 200 hourly SMA. Also, this makes it prudent to wait for some continuation buying before positioning for any significant bullish movement. The previous day’s high, around the 109.25-30 region, could act as an immediate hurdle., above which the USD / JPY pair could rise again to test the monthly highs.
Before the key event, US bond yields will continue to play a key role in influencing USD price dynamics. Apart from this, investors could follow the signs of the broader market risk sentiment. This could boost demand for the JPY as a safe haven and generate some opportunities around the USD / JPY pair.
USD / JPY technical levels
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