**USD/JPY and AUD/USD: Volatility Within Range as US Dollar Strengthens**
*Adapted and expanded from the original article by Thomas Westwater, Forex.com*
—
The recent movements in the currency markets, particularly involving USD/JPY and AUD/USD, offer critical insight into how shifting global dynamics, central bank policies, and risk sentiment are shaping exchange rates. Traders and investors are closely monitoring the US dollar’s rally and how it plays into the broader outlook for the world’s most actively traded currency pairs. In this analysis, we examine the recent price action, drivers behind the volatility, and the technical and fundamental perspectives shaping USD/JPY and AUD/USD. Additional insights from Reuters and Investing.com help provide a comprehensive perspective.
### Market Overview: US Dollar Rally and Global Context
The US dollar has shown resilience against major currencies in recent sessions. Several key factors are fueling the dollar’s strength:
– **Federal Reserve Policy:** The trajectory of interest rates in the US remains paramount. With the Fed signaling a higher-for-longer approach to rates, the dollar looks competitive relative to lower-yielding, risk-sensitive counterparts.
– **Global Risk Sentiment:** Escalating geopolitical tensions, particularly surrounding China and the ongoing situation in Ukraine, are prompting safe-haven flows into the dollar.
– **Economic Data:** Stronger-than-expected US economic indicators, such as robust nonfarm payrolls and retail sales, reinforce the likelihood of protracted Fed tightness.
### USD/JPY: Consolidation After Key Reversal
The USD/JPY pair has experienced notable volatility in recent months. After surging to multi-decade highs in the spring, the pair faced sharp corrections, some triggered by reported intervention from the Bank of Japan (BoJ).
#### Recent Price Action
– The pair has oscillated within a defined range, generally holding between 154 and 158 since early May.
– Brief excursions above 160 prompted speculation and reports of official Japanese intervention.
– Support at the 50-day simple moving average (SMA) has repeatedly limited downside, while resistance near 158 persists.
#### Drivers Behind USD/JPY Movements
– **Bank of Japan Policy:** The BoJ maintains ultra-loose monetary policy, setting it apart from other major central banks. Even as it cautiously tweaks its yield curve control, its stance remains dovish.
– **US-Japan Interest Rate Differential:** This gap drives capital flows into higher-yielding US assets. As long as the Fed remains hawkish, upward pressures on USD/JPY are likely.
– **Potential for Intervention:** Repeated sharp rises in the yen’s weakness have prompted Japanese authorities to step in to stem volatility. Markets remain watchful for signs of further intervention.
#### Technical Perspective
– The daily chart shows price consolidation following the explosive spike above 160 and subsequent plunge. Bollinger Bands are compressing, indicating reduced volatility and the potential for an imminent breakout.
– Critical support zones: 156 (psychological level and horizontal support
Read more on AUD/USD trading.