USD/JPY, contained above 113.00, bounces up to 113.50 area
- The dollar remains near three-year highs at 113.80, supported above 113.00.
- The Japanese yen edges up after a four-day downtrend.
- USD/JPY's rally is heading to 120.00 – ING.
The US dollar is regaining some ground against the Japanese yen on Wednesday’s US trading session. The pair’s reversal from three-year highs at 113.80 has found support at 113.25, before ticking up to 113.45.
The yen edges up against a softer US dollar
The Japanese yen appreciated earlier on Wednesday, supported by a somewhat weaker dollar, on the back of a flattening US yield curve. The 10-year bond yield has dropped to 1.57% after having peaked at 1.61 on Tuesday, while the 2-year yield has surged to 18-month highs at 0.36%
Furthermore, the US macroeconomic calendar has confirmed the inflationary pressures threatening economic recovery. US consumer prices accelerated at a 0.4% monthly pace and 5.4% year-on-year in September, from 0.3% and 5.3% respectively in September.
These figures bring into question Fed Powell’s theory of a “transitory” high inflation and bolster expectations the Federal Reserve may announce the rolling back of its massive monetary stimulus program in November.
USD/JPY: Seen rallying towards 120.00 – ING
According to the FX Analysis team at ING, however, USD’s rally is far from being finished. They expect the pair to reach prices at 120.00: “Pressure is building for a topside break out in USD/JPY. We think the US macro/Fed story will be a positive one for the dollar over the next 15 months (USD/JPY to trade to 120), while home-grown developments look slightly JPY bearish.”
Technical levels to watch
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
