USD/JPY climbs to daily highs and approaches 130.00

Further selling pressure around the Japanese yen lifts USD/JPY to fresh daily highs in the vicinity of the key 130.00 hurdle at the end of the week.

USD/JPY focuses on dollar, yields

USD/JPY keeps the choppy price action well in place on Friday, leaving behind the previous daily pullback and regain composure near the 130.00 neighbourhood in context where the greenback manages to stage a decent bounce and yields march further up.

On the latter, the US 10-year yields approach the 3.45% region, while their Japanese counterparts leave behind two daily pullbacks and reclaim the 0.40% hurdle so far, as the effects of dovish hold from the BoJ (January 18) continue to fizzle out.

Data wise in the Japanese docket, the headline Inflation Rate and the Core Inflation Rate rose 4.0% in the year to December, while inflation Rate Ex-Food and Energy gained 3% from a year earlier.

What to look for around JPY

The 3-month negative streak in USD/JPY met some initial support in the 127.20 region so far (January 16).

The pair, in the meantime, continues to track developments from the Fed’s normalization process and the opposing views from the markets – which continue to favour a pivot in the near term – and the hawkish narrative from FOMC governors, which defend a rapid move further up in rates (5%-5.25%).

In the more domestic scenario, market participants are expected to closely follow any hint from the BoJ indicating a potential exit strategy from the current ultra-accommodative policy stance and/or another tweak of the Yield Curve Control (YCC).

USD/JPY levels to consider

As of writing the pair is gaining 0.88% at 129.53 and faces the next up barrier at 131.57 (weekly high January 18) seconded by 134.77 (2023 high January 6) and then 136.69 (200-day SMA). On the downside, a break below 127.21 (2023 low January 16) would aim to 126.36 (monthly low May 24 2022) and finally 121.27 (weekly low March 31 2022).