USD/JPY’s upwards trajectory over the past few sessions that saw the pair break above key resistance in the 116.40s has continued on Wednesday, with the pair coming within a whisker of hitting 118.50 for the first time since January 2017. Trading just below the half-round figure, the pair is up another 0.2% on the day and set for an eighth successive day of gains during which time the pair has rallied more than 3.0%. The sharp rally has been driven an equally steep rise in long-term US bond yields over the same period, with the 10-year yield nearing 2.20% on Wednesday from as low as the 1.60s% as recently as the start of last week.

Overbought daily studies warn of consolidation/correction before larger bulls resume, though the action will directly depend on Fed’s verdict.

Hawkish stance with 0.25% (possibly 0.5%) hike and signals of steady rate increases in coming months, would lift the dollar further.

Break of 118.66 pivot would expose Fibo barrier at 119.50 (76.4% of 125.84/98.99) and psychological 120.00 resistance.

On an hourly scale, USD/JPY has formed a double top as the asset found barricades on the re-test of its previous highs at 118.40. Investors dumped the asset after sensing it was an expensive bet. The trendline placed from March 4 lows at 114.65 adjoining the March 9 low and March 10 low at 115.55 and 115.85 will continue to act as major support going forward.

The Relative Strength Index (RSI) (14) has shifted its range from 60.00-80.00 to 40.00-60.00, which signals no more upside until it oversteps 60.00 again.

For an upside, bulls need to surpass the double top formation at 118.40, which will send the major to a five-year high at 118.66, followed by the 27 January 2016 high at 119.07.

On the flip side, bulls can lose control if the major violates the 30-period Exponential Moving Average (EMA) at 118.17 on the downside. Violation of 30-period EMA will drag the pair to 50-period EMA and 100-period EMA at 117.97 and 117.47 respectively

FOMC Dovish Statements might Send Dollar Lower

Mar 16 2022