Title: USD/JPY Rises Amid Strong Risk Appetite and Robust US Dollar Performance
Based on the original article by FXStreet’s Christian Borjon Valencia
The USD/JPY currency pair increased notably on Thursday, driven by a positive shift in global risk sentiment and a broadly firmer US Dollar (USD). Market participants adopted a more optimistic outlook on the US economy, helping to push the USD/JPY pair towards higher levels. Meanwhile, the Japanese Yen (JPY) weakened, adding another layer of support to the upward movement in the currency pair.
This extended the pair’s recent uptrend amid expectations that the US Federal Reserve would maintain higher interest rates for longer than previously anticipated. Simultaneously, economic prospects in Japan appear to be dimming, reducing the appeal of the safe-haven Yen.
Key Drivers Supporting the USD/JPY Upswing:
Improvement in Risk Appetite
– Investors showed renewed appetite for risk, leading to increased demand for risk-sensitive assets.
– Equity markets rallied, and volatility declined, creating an environment that typically favors the US Dollar over the Japanese Yen.
– The Japanese Yen, traditionally viewed as a refuge in times of market uncertainty, saw diminished appeal amid optimism in global economic performance.
Strengthening of the US Dollar
– The US Dollar Index (DXY), a gauge of the greenback’s value against a basket of six major currencies, rose steadily throughout the session.
– A series of robust economic indicators out of the United States underpinned the Dollar’s strength.
– Yields on US Treasury bonds also edged higher, bolstering the Dollar’s attractiveness to investors seeking yield.
US Economic Data Supports Fed’s Higher-for-Longer Rate Outlook
– Economic data from the US continued to reflect resilience in key sectors like labor, retail, and manufacturing.
– Durable goods orders surpassed expectations, and consumer confidence remained strong, validating the Fed’s hawkish stance.
– The Federal Reserve has signaled it may delay rate cuts given persistent inflationary pressures and a resilient US economy.
– These expectations contribute to strengthening the US Dollar as investors price in fewer rate cuts in 2024 compared to previous guidance.
Bank of Japan Faces Growing Economic Concerns
– In contrast to the US, Japan continues to struggle with a series of economic hurdles including weak wage growth, low inflation, and slow recovery in consumption.
– The Bank of Japan (BoJ) maintains an accommodative monetary policy stance in a bid to stimulate economic activity.
– However, the lack of compelling economic data and ongoing structural challenges limit the BoJ’s ability to normalize interest rates in the near term.
– This policy divergence between the Federal Reserve and the BoJ supports further upward movement in the USD/JPY pair.
Technical Analysis: USD/JPY Continues to Climb
From a technical standpoint, the USD/JPY currency pair maintains strong upward momentum, supported by both fundamental and technical indicators.
– The pair traded above several key moving averages including the 50-day and 100-day simple moving averages (SMAs), signaling ongoing bullish sentiment.
– Immediate resistance lies around the 157.00–157.20 range. A sustained break above this level could open the door toward the psychological 158.00 mark and beyond.
– Near-term support is observed near the 156.00 level, followed by more substantial technical support around 155.20–155.50.
– RSI (Relative Strength Index) on the daily chart hovered near overbought territory, which may suggest a possibility of short-term consolidation before further gains.
Outlook for the USD/JPY Pair
Given the current fundamentals and market dynamics, the USD/JPY pair is positioned for further potential upside. Several factors are likely to dictate the pair’s trajectory over the coming sessions:
– US monetary policy expectations remain a key driver.
– Upcoming macroeconomic releases from both the US and Japan will be closely watched by investors for any signs of deviation in central bank policy.
– Risk sentiment, including global equity market trends, will also influence short
Explore this further here: USD/JPY trading.