Yen, Dollar Talking Points:
- USD[1]/JPY[2] loses steam after failing to break above the 116 handle
- Rising yields support USD[3] strength, weighing on the safe-haven Yen[4]
- Key technical levels pose as an additional catalyst for price action[5]
USD/JPY[6] price action has temporarily stalled after bulls failed to push prices above the key psychological level of 116.000, currently holding as resistance for the imminent move.
In the wake of rising inflation, a dovish BoJ (Bank of Japan)[7] and a more hawkish tone from the Federal Reserve[8] has boosted demand for the greenback while pressurizing the safe-haven Yen.
Find out more about the impact of interest rates on the foreign exchange market[9]
With higher US interest rates now priced in, the release of a positive NFP[10] (non-farm payroll) report on Friday now places US CPI data in the spotlight. With the inflation[11] rate YoY forecasted at 7.3% (the highest level since 1982), a higher than expected reading may result in the Fed increasing rates more aggressively and at a faster pace than was initially expected, supporting Dollar strength.
DailyFX Economic Calendar[12]
USD/JPY Technical Analysis
After the appearance of a golden cross on the daily time-frame (in March 2021), USD/JPY bulls took control of the trend before running into a wall of resistance at the key psychological level of 116 which continues to hold bulls at bay.
As prices remain above the 50-day moving average (MA), the MACD (moving average convergence/divergence has crossed back above the zero line, a potential indication that the upward trend may continue to hold, at least for now.
USD/JPY Daily Chart
Chart prepared by Tammy Da Costa[13]
