- USD/JPY gained strong positive traction on Wednesday and reversed a significant portion of its weekly losses.
- A positive risk tone undermined the safe haven JPY and extended support amid modest USD strength.
- US bond yields rallied, an upbeat US ADP report underpinned the dollar and acted supportive.
The pair USD/JPY built on its steady intraday rise during the early American session and was last seen trading near the daily high just below 115.50 following the US ADP report.
The pair attracted fresh buying near the 114.80-114.75 region on Wednesday and has now reversed much of its weekly losses recorded in the last two trading sessions. A slight improvement in global risk sentiment steered investors away from traditional haven assets and weighed on the Japanese yen. This, coupled with modest US dollar strength, acted as a tailwind for the USD/JPY pair and continued to support the positive intraday move.
The bulls were also inspired by a nice rally in US Treasury yields, which extended some support to the dollar. Apart from this, an upbeat report from the US ADP, showing that private sector employers added 475,000 jobs in February, further underpinned the USD. The headline figure beat expectations and was accompanied by a sharp upward revision to the previous month’s print to show a 509,000 job addition versus a previously reported loss of 301,000.
However, it remains to be seen whether the USD/JPY pair is able to capitalize on the move or finds itself offered again at higher levels amid the worsening situation in Ukraine. In fact, the latest reports indicated that Russia has intensified the bombardment of Ukrainian cities and a large Russian convoy was approaching the capital, Kiev. Therefore, it will be prudent to wait for some follow-on buying before positioning for any further near-term appreciation moves.
Market participants are now awaiting Fed Chairman Jerome Powell’s semi-annual testimony before the House Financial Services Committee for fresh momentum around the USD/JPY pair. Meanwhile, the market’s focus will remain glued to developments surrounding the Russia-Ukraine saga amid uncertainty over when the second round of talks will take place. This further warrants caution from aggressive bullish traders.
Technical levels
Source: Fx Street
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