- USD/JPY regains traction on Thursday and spikes to a one-month high around the 115.70 area.
- Risk appetite weighs on the safe haven JPY and acts as a tailwind for the pair.
- Upbeat Fed expectations and elevated US bond yields support the pair’s move higher ahead of US CPI data.
The pair USD/JPY moves higher at the start of the European session on Thursday, reaching a new one-month high, around the region of 115.70 in the last hour.
After the previous day’s modest move lower, USD/JPY captured fresh buying on Thursday and may now be looking to build on its recent bullish momentum seen in the past week. A positive tone around equity markets has weighed on the safe-haven Japanese yen and has acted as a tailwind for the pair. The bulls took further indications from the high yields on US Treasury bondsbolstered by hawkish Fed expectations, which continued to offer some support to the US dollar.
Investors seem convinced that the US central bank would adopt a more aggressive monetary policy to combat stubbornly high inflation. In addition, markets have been pricing in the possibility of a 50 basis point rate hike from the Fed in March. This, in turn, would have pushed US bond yields to multi-year highs earlier this week. Therefore, the US CPI report for January, to be released at the start of today’s American session, could provide further clues about the pace of the Fed’s monetary policy tightening cycle.
This, in turn, will play a key role in influencing short-term USD price action and helping investors determine the next directional move for USD/JPY. Aside from this, the US economic calendar on Thursday also includes the release of weekly initial jobless claims. This, along with US bond yields, will drive demand for the USD. Investors will take further cues from the broader market risk sentiment to take advantage of some short-term opportunities around the pair.
USD/JPY technical levels
Source: Fx Street
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