USD/JPY Forecast: Bulls backed by central banks’ imbalances

Valeria Bednarik FXStreet

USD/JPY Current price: 111.02

BOJ’s Meeting Minutes pointed to persistently low inflationary pressures.
US Federal Reserve chief Powell cooled down inflationary concerns.
USD/JPY is bullish at fresh 2021 highs above the 111.00 threshold.

The USD/JPY pair surpassed the 111.00 level, reaching levels that were last seen in March 2020. The positive mood that sent Wall Street sharply higher on Tuesday underpinned the pair, although such an optimistic sentiment seems to have eased. Asian shares trade mixed, while European indexes are mostly down. Meanwhile, US Treasury yields remain flat.

US Federal Reserve chief Jerome Powell testified before Congress on Tuesday but added nothing new to what the market already knew. Powell repeated its optimistic view of the economic recovery and cooled down inflation concerns by repeating it would likely be temporary. The Bank of Japan published the Minutes of its latest meeting, which showed that policymakers are confident on an economic comeback, but higher inflation remains unlikely.

Japan published the preliminary estimate of the Jibun Bank Manufacturing PMI for June, which printed at 51.5, worse than the 52.3 expected. The April Leading Economic Index was upwardly reviewed to 103.8, while the Coincident Index for the same month resulted at 95.3. The US session will bring the preliminary estimates of the June Markit PMIs.

USD/JPY short-term technical outlook

The USD/JPY pair is bullish in the near-term. The 4-hour chart shows that technical indicators head firmly higher within overbought readings, without signs of upward exhaustion. Meanwhile, the pair keeps advancing above all of its moving averages, which gain bullish traction. The advance is set to accelerate on a break above 111.20, the immediate support level.

Support levels: 110.95 110.50 110.10

Resistance levels: 111.20 111.60 112.00

View Live Chart for the USD/JPY

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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