USDJPY recovers to 140.00, after falling to multi-month lows around 138.50

• Federal Reserve officials and risk aversion prop up the dollar.
• The Japanese yen fails to gain traction following BOJ Kuroda’s comments.
• USDJPY is forming a bullish harami, which could exacerbate a test of 142.50.

After falling more than 5% in the last week, the USDJPY it is recovering, bouncing off last week’s lows around 138.00 and rising over 150 points. Factors such as the hawkish comments from the Federal Reserve triggered a risk-off momentum, as evidenced by the fall in US stocks. At the time of writing, the USDJPY is trading at 140.28, up 1.10% from its opening price.

The dollar is supported by the comments of the Federal Reserve

Sunday’s hawkish comment from Federal Reserve (Fed) Governor Christopher Waller changed sentiment. Waller said the Fed “still has a ways to go” in raising interest rates, adding that the central bank could moderate the size of interest rate hikes to 50 basis points at its December meeting or the nextreiterating that the US central bank is nowhere near a pause.

Meanwhile, Fed Vice Chair Lael Brainard crosses the wires saying the latest CPI suggests core personal consumption spending (PCE) could also show a decline. She added that it would be wise to slow the rate of hikes, and further rate hikes would be data dependent.

The Dollar Index, a gauge of the value of the USD against a basket of pairs, extended its gains by 0.36% to 106,807, after falling to a three-month low of 106,281. Meanwhile, the 10-year US Treasury yield fell one percentage point to 3.865%, limiting the USDJPY’s recovery around current exchange rates.

Japan’s economy picks up, says BOJ’s Kuroda

In the Asian session, the Governor of the Bank of Japan (BoJ), Haruhiko Kuroda, affirmed that the economy is picking up and reiterated that monetary policy conditions will remain flexible to support the US economy. Kuroda added that the BoJ is monitoring the impact of commodity inflation and monitoring the effects of the foreign exchange market.

USDJPY Price Analysis: Technical Perspective

USDJPY is biased neutral, although it has broken above the 100-day EMA at 140.79, exposing USDJPY to selling pressure. Notably, the Relative Strength Index (RSI) has broken out of oversold conditions, suggesting that sellers are losing momentum. Furthermore, the USDJPY price action of the past two days is forming a bullish-harami pattern.

If the USDJPY breaks above the 100 day EMA, the next resistance would be the 141.00 psychological figure. Once broken, the next resistance would be the November 11 daily high at 142.48, followed by the 50-day EMA at 145.37.