- A combination of supporting factors allowed USD/JPY to recover further from a two-month low.
- A modest recovery in the risk sentiment undermined the safe-haven JPY and remained supportive.
- Bulls further took cues from an uptick in the US bond yields, though a softer USD could cap gains.
The USD/JPY pair maintained its bid tone heading into the European session and was last seen trading near daily highs, around the 113.60 region.
Following the overnight volatile price swings, the USD/JPY pair gained some positive traction on Wednesday and was supported by a combination of factors. The global risk sentiment stabilized a bit as investors preferred to wait and see if the new Omicron coronavirus variant would eventually derail the economic recovery. This was evident from a goodish recovery in the equity markets, which undermined the safe-haven Japanese yen and acted as a tailwind for the major.
Bulls further took cues from some follow-through recovery in the US Treasury bond yields, bolstered by Fed Chair Jerome Powell's hawkish comments. Testifying before the Senate Banking Committee, Powell said it's time to retire the word 'transitory' and it is appropriate to consider wrapping up the taper of asset purchases, perhaps a few months sooner. He further added that the risk of persistently higher inflation has increased and expects high inflation through next year.
Reacting to Powell's remarks, the money markets started pricing in the possibility of at least a 50 bps rate hike by the end of 2022. This, in turn, was seen as a key factor that continued underpinning the US bond yields. Despite rising bets for a more aggressive policy tightening by the Fed, the US dollar, so far, has struggled to attract any meaningful buying. This could hold back traders from placing aggressive bullish bets and cap the USD/JPY pair’s ongoing recovery from a near two-month low.
Market participants now look forward to the US economic docket, featuring the release of the ADP report and ISM Manufacturing PMI. Apart from this, Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen's joint testimony before the House Financial Services Committee will influence the USD price dynamics. Traders will further take cues from developments surrounding the coronavirus saga and the broader market risk sentiment to grab some opportunities around the USD/JPY pair.
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 pressures as Fed officials hold firm on rate policy
The Australian Dollar is on the defensive against the US Dollar, as Friday’s Asian session commences. On Thursday, the antipodean clocked losses of 0.21% against its counterpart, driven by Fed officials emphasizing they’re in no rush to ease policy. The AUD/USD trades around 0.6419.
EUR/USD extends its downside below 1.0650 on hawkish Fed remarks
The EUR/USD extends its downside around 1.0640 after retreating from weekly peaks of 1.0690 on Friday during the early Asian session. The hawkish comments from Federal Reserve officials provide some support to the US Dollar.
Gold price edges higher on risk-off mood hawkish Fed signals
Gold prices advanced late in the North American session on Thursday, underpinned by heightened geopolitical risks involving Iran and Israel. Federal Reserve officials delivered hawkish messages, triggering a jump in US Treasury yields, which boosted the Greenback.
Bitcoin Price Outlook: All eyes on BTC as CNN calls halving the ‘World Cup for Bitcoin’
Bitcoin price remains the focus of traders and investors ahead of the halving, which is an important event expected to kick off the next bull market. Amid conflicting forecasts from analysts, an international media site has lauded the halving and what it means for the industry.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.