The USD/JPY pair keeps extending its rally, breaking the 122.00 mark, underpinned by hawkish Fed speaking preparing to hike rates 50 bps in the May meeting, which spurred a jump in US Treasury yields amidst an upbeat mood in the financial markets. At the time of writing, the USD/JPY is trading at 122.30 at new YTD highs.

The US economic docket featured Initial Jobless Claims for the week ending on March 19, which fell the most since 1969. The reading came at 187K lower than the 212K foreseen. Later in the day, the Markit PMIs for March were revealed, which came better than expected.

Of late, the market mood improved, as Europen equities made a U-turn after recording losses earlier in the North American session. Meanwhile, US stocks consolidated in the green, despite growing concerns of high inflation as the US central bank began its tightening cycle.

We highlighted  that ‘further USD strength is not ruled out but in view of the deeply overbought conditions, a sustained rise above the major resistance at 121.50 was unlikely’. But USD subsequently rose to 122.20 before providing any expected pulling back. Conditions remain overbought and upward momentum is showing tentative signs of easing and USD is unlikely to advance much further. \here is not much to add to our update . As highlighted, while it is left to be seen if USD can maintain the current frenetic pace of advance, the risk is clearly for further USD strength. The next resistance level of note is at 123.0 followed by 123.73. On the downside, a breach of 120.00 (‘strong support’ level was at 119.60 yesterday) would indicate that the upward pressure that started two weeks ago has eased.

US Stocks Consolidated the Greenback with Hawkish Momentum

Mar 24 2022