USD/JPY hits fresh highs as USD strengthens

The US dollar continued to rise across the board the board an printed a fresh 3-month high against the yen. It is headed toward the second highest weekly close since the first quarter.

USD/JPY: Data, yields and risk appetite

The pair started to rally after the US Senate passed the budget plan, paving the way for Trump’s tax reform plan. That still remains the main driver in today’s price action. It pushed US bond yields to the upside and boosted the greenback. The dollar received more support from US housing data. Existing home sales rose 0.7% in September to an annual rate of 5.39 million above the 5.30 expected.

Risk appetite across financial markets weakened the yen. The Dow Jones was up 0.52% at record highs near 23,300.

Later today, after markets close, Janet Yellen will speak on what will probably be her last words before the November FOMC meeting. On Sunday, Japan will have general elections. Markets discount a victory of PM Abe’s party. “As the majority of voters have still not decided who to vote for, there is still some uncertainty attached to the election outcome. However, financial markets seem complacent that Abe will remain Prime Minister after the election and there is hardly any election risk premium priced into the FX option market”, said analysts at Danske Bank.

USD/JPY Technical levels

The pair reached 113.56, the highest level since July 9 and at the moment of writing, it was trading around 113.40. USD/JPY still has not been able to consolidate on top of 113.45.

To the upside resistance levels might be located at 113.65 (Jul 5 high), 113.95/00 and 114.45/50 (Jul highs). On the flip side, supports could be seen at 113.05/10 (US session low), 112.80 (Oct 10 low) and 112.45 (Oct 17 high / Oct 20 low).

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