USD/JPY consolidates above 142.00 mark following the overnight volatile swing

USD/JPY struggles to gain any traction on Friday and remains confined in a range.
Government intervention in the FX market underpins the JPY and caps the upside.
Rising US bond yields, the Fed-BoJ policy divergence continues to extend support.

Haresh Menghani FXStreet

The USD/JPY pair struggles to capitalize on the previous day's late rebound from over a two-week low and oscillates in a range through the first half of trading on Friday. The pair is currently placed in neutral territory, around the 142.25 region and is influenced by a combination of diverging forces.

The Japanese yen continues to draw support from the fact that authorities intervened in the market for the first time since 1998 to stem the rapid decline in the domestic currency. Apart from this, the prevalent risk-off environment, amid growing recession fears, is underpinning the safe-haven JPY and acting as a headwind for the USD/JPY pair. That said, a strong US dollar helps limit the downside for spot prices, at least for the time being.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, remains pinned near a 20-year amid a modest hawkish stance adopted by the Federal Reserve. It is worth recalling that the US central bank signalled on Wednesday that it will likely undertake more aggressive rate increases to cap inflation. This remains supportive of a further rise in the US Treasury bond yields and continues to lend support to the buck.

The bank of Japan (BoJ), on the other hand, aggressively defended its yield curve ceiling and reaffirmed its commitment to ultra-low interest rates on Thursday. This results in the widening of the US-Japan rate differential and supports prospects for the emergence of fresh buying around the USD/JPY pair. It is worth mentioning that the Fed-BoJ policy divergence has been a key factor behind the yen's slump of over 25% against its USD since the beginning of 2022.

Nevertheless, the fundamental backdrop suggests that the path of least resistance for the USD/JPY pair is to the upside. Market participants now look forward to the release of the flash US PMI prints for a fresh impetus. This, along with the US bond yields and Fed Chair Jerome Powell's speech, will influence the USD. Apart from this, the broader risk sentiment might contribute to producing short-term trading opportunities on the last day of the week.

Technical levels to watch

USD/JPY

Overview
Today last price	142.2
Today Daily Change	-0.16
Today Daily Change %	-0.11
Today daily open	142.36

Trends
Daily SMA20	141.93
Daily SMA50	138.04
Daily SMA100	135.33
Daily SMA200	127.06

Levels
Previous Daily High	145.9
Previous Daily Low	140.35
Previous Weekly High	144.96
Previous Weekly Low	141.66
Previous Monthly High	139.08
Previous Monthly Low	130.4
Daily Fibonacci 38.2%	142.47
Daily Fibonacci 61.8%	143.78
Daily Pivot Point S1	139.84
Daily Pivot Point S2	137.32
Daily Pivot Point S3	134.29
Daily Pivot Point R1	145.4
Daily Pivot Point R2	148.43
Daily Pivot Point R3	150.95

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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