- USD/JPY gains some positive traction on Thursday, breaking a three-day losing streak.
- The purchases of dollars are considered a key factor for the support of the main currencies.
- Bets on an imminent pause in the Fed rate hike and a softer risk tone could limit gains.
The pair USD/JPY reverses an initial slide in the North American session to levels below 131.00 and rises to a new daily high in the last hour, snapping a three-day losing streak. The pair is moving away from the one-week lows reached on Wednesday and is now trading around the 131.65-131.70 zone, up almost 0.30% on the day.
He US dollar (USD) is supported by the previous day’s rebound from lows in more than two months and gains some traction for the second day in a row, which in turn acts as a tailwind for the USD/JPY pair. That said, significant hikes seem unlikely in a context where it is increasingly accepted that the Federal Reserve (Fed) is about to end its rate hikes to combat inflation. In fact, markets are even pricing in the possibility of a 25 basis point hike at the next FOMC meeting in May and the possibility of rate cuts later in the year.
The larger-than-expected rise in weekly jobless claims follows the disappointing release of the ADP report on Wednesday and suggests that the Fed’s efforts to cool the labor market may be having some effect as the data raises the stakes for an imminent pause in the US central bank’s rate hike cycle, keeping Treasury yields depressed near multi-month lows. This, in turn, should curb aggressive bets by dollar bulls and limit USD/JPY gains, at least for now.
On the other hand, investors will prefer to stay on the sidelines and wait for the US jobs data release on Friday. The NFP report will be key in influencing market expectations of the Fed’s next move and boosting demand for the dollar. This, in turn, should help investors determine the next leg of a directional move for the USD/JPY pair. However, the fundamental background warrants some caution before positioning for any further appreciation move for the pair.
Technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
