- USD/JPY catches a fresh bid and recaptures 110.00 in Europe.
- Treasury yields rebound as the risk sentiment improves.
- US PCE data, Powell’s Jackson Hole’s speech to test commitments above 110.00.
USD/JPY is staging an impressive bounce from the Asian session lows of 109.89, as the bulls are back in the game, recapturing the 110.00 level in the lead up to Fed Chair Jerome Powell’s showdown at the Jackson Hole Symposium.
The renewed uptick in the US Treasury yields across the curve, with the 10-year rates jumping to 1.350%, underpinned the rebound in the major.
The risk trades are in a better position, reflective of the 0.30% gain in the S&P 500 futures, as investors are seen shrugging off the latest hawkish Fed view and geopolitical political tensions over Kabul airport blasts.
At the time of writing, USD/JPY is trading close to daily highs of 110.16, up 0.05% on the day, gradually taking cues from a minor US dollar bounce, courtesy of the rebound in the yields.
Earlier on, the yen held the upper edge against the greenback as the market licked its wounds over the Afghanistan bombing, which saw about 12 US troops and 60 civilians as causalities. In the aftermath, US President Joe Biden pledged to strike back at ISIS, who claimed responsibility for the ill-fated incident.
Going forward, all eyes now remain on Powell’s speech, which is likely to offer fresh signals on the US central bank’s taper timeline. If Fed Chair turns dovish and refrains from any taper talk, the US dollar is likely to witness a massive sell-off in tandem with the yields, which could result in fresh declines in USD/JPY.
Also, of note remains the US PCE inflation data, although Powell’s speech is likely to hog the limelight, as an eventful week draws to an end.
USD/JPY: Technical levels
“One-week-old horizontal resistance near 110.22 can challenge the USD/JPY buyers before directing them to the key resistance line from July, around 110.45. Should the quote rises past 110.45, the monthly high of 110.80 may offer an intermediate halt before direct the bulls toward July’s peak of around 111.65. Meanwhile, a downside break of 200-SMA level of 109.90 will drag the quote towards an ascending support line from August 04, surrounding 109.50, FXStreet’s Analyst, Anil Panchal, explains.