April 21, 2024

As Rates Rise, The USD/JPY Is Rallying Again Around 114.00

The USD/JPY is starting to recover towards 114.00 as rising US Treasury yields support the Greenback and help to keep the pair from falling further.

The risk-off mood maintains demand for the JPY as a safe-haven asset, trying to act as a headwind for the duo ahead of the Fed’s policy meeting.

Insights On The Technical Front

USD/JPY CHART Source: Tradingview.com

Despite a little pullback from the daily high, the USD/JPY pair kept its positive tone moving into the European session and was last seen moving in the vicinity of the 113.75 level.

An Overview Of The Fundamentals

A number of supportive factors helped the USD/JPY cross attract some purchasing on the opening day of the new week, ending a three-day losing trend that had lasted since the beginning of the previous week.

Because of a generally upbeat tone in the global markets, the relatively secure Japanese Yen has been undermined, which has been a tailwind for the major. Bulls also drew inspiration from a positive rise in the rates on US Treasury bonds, which helped to resurrect demand for the US Dollar.

Aside from this, the Dollar has been strengthened by the rising market acceptance that the Federal Reserve will tighten monetary policy at a quicker rate than previously expected.

Investors appear to be confident that the Federal Reserve will begin increasing interest rates in March to battle excessive inflation. They have priced in a total of four rate increases in the next year.

As a result, the Federal Open Market Committee’s (FOMC) two-day meeting, which begins on Tuesday, will be the primary focus.

Growing geopolitical hostilities between Russia and Ukraine restricted the upward potential of the USD/JPY pair as the market approached the main event risk of the day.

Because of fears about a possible Russian assault on the US Embassy in Ukraine, the State Department of the United States ordered the households of all American diplomats at the embassy to leave Ukraine.

Furthermore, rumors indicated that President Joe Biden was contemplating dispatching US soldiers to NATO partners in Europe, as well as vessels and planes, according to sources.

The mixed macroeconomic backdrop should be considered when it comes to establishing bold bullish wagers around the USD/JPY pair and verifying that the recent decline from a multi-year peak has run its course.

Traders are now looking forward to the flash US PMI readings (manufacturing and services) for a new jolt of inspiration. This, together with the rates on US Treasury bonds and the overall risk attitude in the market, could result in some trading possibilities around the USD/JPY pair.

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