- A combination of factors helped the USD / JPY gain traction for the second day in a row.
- Optimistic expectations from the Fed and the recovery in US bond yields continued to support the move.
- Risk appetite undermined the safe-haven JPY and provided additional boost.
The pair USD/JPY it shot to fresh 15-month highs, around the 111.60-65 region in mid-European session, although it quickly lost a few pips thereafter. The pair was last seen trading at the 111.40 zone, up 0.25% on the day.
The pair built on the strong positive move the day before and gained some follow-up traction for the second straight session on Thursday. The momentum pushed the USD / JPY pair to the highest level since March 2020 and was sponsored by a combination of factors.
The underlying bullish tone in financial markets, as shown by a prolonged rally in global equity markets, continued to undermine demand for the Japanese yen as a safe haven. Bullish traders followed signs of a strong recovery in US Treasury yields.
Meanwhile, a subdued demand for the US dollar did little to provide additional momentum but kept any further gains for the USD / JPY limited, at least for now. That said, the surprising Fed turnaround acted as a tailwind for the USD and supports the prospects for additional earnings.
It’s worth remembering that lawmakers pushed forward the timing for the first post-pandemic interest rate hikes and signaled two rate hikes by the end of 2023. Market expectations were strengthened by aggressive comments overnight. from Dallas Fed Chairman Robert Kaplan.
In an interview with Bloomberg TV, Kaplan noted that they are experiencing increasing price pressures and would prefer to decrease before the end of the year. Therefore, the key focus will remain on Friday’s release of the US Employment Report (NFP), which could influence the Fed’s policy outlook.
Meanwhile, fresh momentum will be sought on Thursday’s US economic docket, which includes the release of initial weekly jobless claims and the ISM Manufacturing PMI. Aside from this, US bond yields and general market risk sentiment could generate some trading opportunities.
Technical levels
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