English
The USD/JPY Exchange Rate Is Gradually Approaching The 143.00 Threshold And Appears Poised For Further Appreciation
The USD/JPY exchange rate is supported by a combination of factors as it climbs for the second consecutive day. The JPY continues to lose value due to the BoJ's dovish posture and a positive risk tone. Bets on additional Fed rate increases act as a tailwind for the USD and continue to support the currency's movement.
The USD/JPY pair builds on Monday's solid rebound from the mid-141.00s, or a one-week low, and advances for a second consecutive day on Tuesday. During the Asian session, spot prices retrace their steps towards the 143.00 level, aided by a number of factors.
A more dovish posture adopted by the Bank of Japan (BoJ), coupled with the overnight sharp rally in US equity markets, is seen undermining the safe-haven Japanese Yen (JPY) and acting as a tailwind for the USD/JPY pair. It is important to recall that the BoJ's Summary of Opinions, released on Monday, disclosed that policymakers supported the argument for the need to continue the current monetary easing in order to achieve the price stability target with patience. In contrast, Federal Reserve (Fed) officials stated that additional interest rate increases are probable given that inflation remains persistently high and the labour market remains tight.
This follows Friday's closely-watched US employment report, which indicated continued labour market tightness and raised expectations for a soft landing for the economy. This could enable the Fed to maintain its hawkish stance and leave the door open for a further 25 basis point rate hike in September or November. The outlook remains supportive of elevated US Treasury bond yields and provides some support for the US Dollar (USD), which is seen as an additional factor driving the USD/JPY pair. However, USD bulls appear reluctant to place aggressive wagers ahead of Thursday's US consumer inflation data release.
The crucial US CPI report will play a key role in influencing market expectations regarding the Fed's future rate-hike course, which should stimulate USD demand and aid in determining the next leg of a directional move for the USD/JPY pair. In the interim, the publication of Japanese current account data that exceeds expectations does little to alleviate intraday selling pressure on the domestic currency. This, in turn, implies that the path of least resistance for spot prices is to the upside and supports the likelihood of a move back to retest the monthly high, which was touched last Thursday in the region of 143.85-143.90.
Bonus rebate to help investors grow in the trading world!
