USD/JPY Rises for Third Day, Hits 157.25 High

USD/JPY Rises for Third Day, Hits 157.25 High

Key Points:

  • The USD/JPY currency pair has risen for the third consecutive day, reaching a high of 157.25 during the Asian session on Tuesday.
  • The pair approached a critical supply zone (157.65-157.70), with traders cautious ahead of key US macroeconomic data and central bank events.

The USD/JPY currency pair has demonstrated a robust upward trajectory, marking its third consecutive day of gains. The pair’s performance, rising on four out of the last five trading days, underscores this positive momentum. During the Asian session on Tuesday, the pair surged to over a one-week high, hovering around the 157.25 mark. However, it approached a critical supply zone between 157.65 and 157.70, where trader sentiment has shown signs of caution. Upcoming significant US macroeconomic data releases and central bank events largely contribute to this hesitance.

Upcoming US Data to Shape USD/JPY Movement

Two highly anticipated events are poised to influence the USD/JPY pair’s trajectory. The first is the release of US consumer inflation figures on Wednesday. This data is expected to be crucial in shaping near-term USD price dynamics, thereby impacting the USD/JPY pair. The Federal Open Market Committee (FOMC) will announce its monetary policy decision on the same day. Investors are particularly focused on any indications regarding the timing of potential interest rate cuts by the Federal Reserve.

Japan’s 0.5% Q1 GDP Drop and BoJ Decisions

Later in the week, the Bank of Japan (BoJ) will announce its monetary policy decision on Friday. Market speculation is rife about a possible reduction in monthly government bond purchases, driven by Japan’s weaker economic performance. According to a report from the Cabinet Office, Japan’s economy contracted by 0.5% in the first quarter, translating to an annualised contraction of 1.8%. These economic conditions will likely influence the BoJ’s policy decisions and subsequently affect the JPY’s performance.

USD at Mid-May High, Supported by Jobs Data

The US dollar has shown considerable strength, reaching its highest level since mid-May as of Monday. Several factors have contributed to this strong performance. Robust US jobs data released last Friday has bolstered confidence in the economy. Additionally, there is a growing belief that the Federal Reserve might maintain higher interest rates for an extended period. This sentiment favours USD bulls, increasing the likelihood of an extended rise in the USD/JPY pair from its 50-day Simple Moving Average (SMA).

JPY Weakens on Q1 Contraction, USD/JPY Gains

The nation’s weaker economic conditions have influenced the Japanese yen. The first quarter contraction reported by the Cabinet Office highlights the economic challenges Japan faces. Furthermore, stable equity markets have also played a role in undermining the JPY, providing additional support for the USD/JPY pair.