USD/JPY bulls testing bear's commitments at critical resistance

  • USD/JPY bulls are chipping away into deep resistance in the 111 area.
  • The US dollar is the focus with Fed speakers dictating the trajectory. 

Rising from a low of 110.57, USD/JPY is currently trading at 110.92 and is higher by 0.29% at the time of writing. The pair is, however, failing to convince at the highs of the day, 111.10, meeting critical resistance.

The US dollar jumped last week after the Fed surprised markets last week when it announced policymakers are forecasting two interest rate hikes in 2023.

The rhetoric mattered because it invalidates the most standard structural bearish USD narrative.

The premise that ultra-loose Fed policy effectively guarantees trend USD depreciation was ruptured last week, but the rally has been nipped in the bud this week as Fed officials back peddle.

Yesterday, for instance, Federal Reserve Chair Jerome Powell said that the central bank won't raise rates on fear of inflation.

He reiterated to Congress that rising inflation is likely temporary and showed no signs of being in a hurry to tighten monetary policy.

Therefore, the arguments for a broad-based, persistent USD rally are not yet compelling.

Powell argued that price pressures should ease their own and that they are due to a "perfect storm" of rising demand for goods and services and bottlenecks in supplying them pertaining to the recovery in economic activity in a post covid world.

Looking to the curve which matters for USD/JPY, it is uneven with front-end differentials moving in favour of the USD but longer-term ones subsiding.

As for domestic catalysts from Japan, the Bank of Japan Governor Kuroda has seemingly shot down any notions of adjusting its YCC, which sank JGB yields.

Policymakers have to be happy with the recent yen weakness that has come along with the flatter curve.

Meanwhile, from a positioning point of view, JPY net short positions trended lower for a fourth week ahead of last week’s Fed and BoJ policy meetings.

Speculators have held net short JPY positions since early March.

Overall, cheap money and well-supported stock markets have lessened safe-haven demand for the yen.

USD/JPY technical analysis

The price is testing the bearish commitments at a critical resistance area on a daily chart in the 111 level.

Zooming in, we can see that there are prospects for a pullback to test the support structure before an onward continuation.

Failures there, however, could open prospects of a test of the 110 level and lower. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD hovers around 1.1900, retains weekly gains

The EUR/USD pair trades around the 1.19 mark after the Eurozone Q2 Prelim GDP beat estimates with 2% while US PCE inflation rose by less than anticipated in June, printing at 3.5% YoY. Risk-on mood persists.


GBP/USD retreats after flirting with 1.4000

GBP/USD retreated from near the 1.4000 level, but the greenback remains away from investors' radar. Optimism over the Brexit issue and the declining trend in new COVID-19 cases in the UK offers support to the pound.


XAU/USD slides to $1,820 area, downside seems limited

Gold traded with a mild negative bias around the $1,825 region, or daily lows, during the early North American session, albeit lacked any follow-through selling.

Gold News

Shiba gets listed on eToro as demand for SHIB skyrockets

Leading investment platform eToro has been adding cryptocurrency assets on popular demand from users. The Dogecoin killer recently amassed 600,000 holders despite range-bound price action. 

Read more

NIO shares rise again as Wall Street shrugs off recent China woes

NYSE:NIO added 1.86% as EV and China stocks bounced back again. Nio rides higher as industry leader Tesla gets some major upgrades. Nio rival XPeng releases a refreshed look for its compact SUV.

Read more