USD/JPY updates to its daily high after US macro data, but struggles to capitalize on the move

• USD/JPY hits a new daily high in the past hour, though it lacks bullish conviction.
• US macroeconomic releases, mostly upbeat, support the dollar and provide a modest boost.
• Bets on smaller Fed rate hikes continue to weigh on the dollar and limit hikes.

The pair USD/JPY receives new offers during the early hours of the North American session and hits a new daily high around the 130.30-130.35 zone as a reaction to the mostly upbeat US macroeconomic data. Momentum quickly runs out and drags the pair back to the key psychological 130.00 level within the last hour.

The dollar’s intraday recovery from eight-month lows picked up after knowing the advance in US GDP, which reported annualized growth of 2.9% in the fourth quarter. This figure was lower than the 3.2% growth recorded in the previous quarter, although it exceeded consensus estimates of 2.6%. Additionally, Durable Goods Orders beat expectations and rose 5.6% in December, slightly boosting the dollar and USD/JPY.

However, the data did little to counter market expectations of a less aggressive tightening of monetary policy by the Fed. In fact, markets are still pricing in a 25 basis point Fed rate hike in February. , which is evident by a rather muted reaction in the markets. This, in turn, is preventing USD bulls from making aggressive bets. Apart from this, fresh speculation that high inflation could invite a more aggressive stance from the Bank of Japan (BoJ) caps the USD/JPY pair’s gains.

Even from a technical perspective, spot prices are facing rejection near two-week-old downtrend line resistance. Said barrier is currently before 130.00 and should act as a support point, which if decisively broken should pave the way for further gains. However, traders would prefer to stay on the sidelines awaiting the results of the FOMC’s monetary policy meeting, scheduled for next Wednesday.

Technical levels to watch