- USD/JPY gains strong traction on Wednesday and rallies to its highest level since August 1998.
- The Fed-BoJ policy divergence weighs heavily on the JPY and remains supportive of the move.
- Overbought oscillators on the daily chart could cap gains ahead of the FOMC meeting minutes.
The USD/JPY pair scales higher through the early North American session on Wednesday and hits a new 24-year peak, around the 146.85 region in the last hour.
A combination of factors continues to weigh on the Japanese yen and act as a tailwind for spot prices amid the underlying bullish sentiment surrounding the US dollar. The Bank of Japan (BoJ), so far, has shown no inclination to hike interest rates, marking a big divergence in comparison to a more hawkish stance adopted by other major central banks. Apart from this, Wednesday's domestic data, showing that machinery orders fell more than expected in August, is seen undermining the JPY.
The US dollar, on the other hand, remains well supported by the prospects for a more aggressive policy tightening by the Fed and provides an additional lift to the USD/JPY pair. In fact, the markets have been pricing in another supersized 75 bps Fed rate hike move in November. The bets were reaffirmed by the release of the US Producer Price Index, which came in stronger-than-estimated and might have lifted expectations from the US consumer inflation figures, due on Thursday.
The latest leg up could further be attributed to some technical buying above the Asian session swing high, around the 146.35-146.40 region. That said, speculations for more currency market intervention by Japanese authorities might hold back bullish traders from placing fresh bets amid overbought oscillators on the daily chart. BoJ Governor Haruhiko Kuroda said that the government intervention last month to stop one-sided depreciating moves in JPY was quite appropriate.
Furthermore, investors might also prefer to move to the sidelines and wait for a fresh catalyst from the FOMC meeting minutes, due later during the US session. The focus will then shift to the latest US CPI report on Thursday, which is anticipated to remain stubbornly high and reinforce the Fed's hawkish rhetoric. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the upside and corrective pullbacks could still be seen as a buying opportunity.
Technical levels to watch
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.
Recommended content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Bitcoin price extends retreat from $69K as old whales shift their holdings to new whales
Bitcoin price continues to move further away from the $69,000 threshold, gaining ground as BTC bulls hope for a retest of the $73,777 peak. This is because of the general assumption that clearing this blockade would set the tone for a reach higher, marking a new all-time high.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.