Several different forces worked together on Tuesday to help the USD/JPY regain upward momentum.
The safe-haven Yen was weakened and some support was extended as a result of a favorable risk tone. The Federal Reserve rate hike wagers offered a tailwind for the Dollar, as well as some mild support.
Review Of The Technical Aspects
USD/JPY CHART Source: Tradingview.com
While the USD/JPY pair maintained its consistent intraday upward movement, it soared to a new daily high in the vicinity of the 115.65 zone throughout the early North American trading session.
An Overview Of The Fundamentals
Following a successful defense of the critical 115.00 psychological level on Tuesday, the USD/JPY cross received some fresh bids and has now recovered from the previous day’s declines to reach a one-week low.
This was the opening day of a five-session upward trend, which was aided by a number of supportive variables.
The relatively secure Japanese Yen suffered as a result of a generally optimistic tone in the equity markets, which functioned as a tailwind for the USD/JPY currency pair.
The likelihood of a stronger tightening of monetary policy by the Federal Reserve, on the other hand, gave some support to the US currency, which helped to boost the value of the pair even further.
It is worth noting that the financial markets have completely priced in the prospect of a Fed lift-off in March as a likelihood.
In addition, comments by Atlanta Federal Reserve President Raphael Bostic, who stated that March would be a suitable time for the first-rate rise, helped to strengthen the market’s position.
Bostic went on to say that the outflow of the financial statements may begin as soon as next year and that three rate rises are expected in 2022, with probabilities pointing to a fourth due to the prospect of higher inflation.
Because of this, the Federal Reserve’s nomination session in the Senate Banking Committee will remain the focal point of attention.
To get insight into the expected timing and speed of policy generalization, investors will pay particular attention to Powell’s statements.
Aside from that, the publication of consumer inflation numbers in the United States on Wednesday will play a significant role in affecting the USD and providing a fresh directional push to the USD/JPY pair.
The fundamental environment appears to be biased in favor of optimistic traders, which implies that the current corrective decline from a five-year high reached last week has reached its apex and will be reversed.
The chance of seeing some follow-through momentum in the direction of recovering the 116.00 level remains very much alive.