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  • The USD/JPY reached a monthly high of about 115.70.
  • Positive risk sentiment undermined the safe-haven yen and supported the pair.
  • The Fed’s expectations of rising US bond yields provided support ahead of US CPI data.

The USD/JPY price reached a monthly high near 115.70 before the European session. The rise is attributed to risk-on sentiment.

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On Thursday, the USD/JPY received a fresh supply after it experienced a slight decline the previous day. The pair may now be looking to build on some of the recent bullish momentum seen in the last week or so. Stock market optimism undermined the safe Japanese yen and boosted the major currency. Bulls were also encouraged by higher US Treasury yields supported by hawkish Fed expectations, which supported the US dollar.

The US Federal Reserve is expected to take a more aggressive stance on stubborn inflation. Moreover, the Fed’s possible rate hike in March has been discounted by markets. Earlier this week, US bond yields hit multi-year highs as a result. Due to early North American trading, the January US CPI report could provide fresh clues to the Fed’s tightening cycle.

As a result, the short-term dynamics of the US dollar price will be influenced significantly, and traders will be able to predict the next phase of the directional movement between the dollar and the yen.

On Thursday, the US economic report will also include the usual weekly report on initial jobless claims. Combined with the US bond yields, this will boost demand for the US dollar. To capitalize on some short-term opportunities around the major currencies, traders will continue to consider the broader market risk sentiment.

USD/JPY price technical analysis: Double top formation

usd/jpy price

The USD/JPY price has tested the swing highs around 115.70, forming a double top. The price is slightly off the highs now. After the double top, the pair may correct lower towards 115.20 area before continuing the rally. If the price manages to break 115.70, the next hurdle would be 116.00 ahead of another swing top around 116.30. The key SMAs on the 4-hour chart (20, 50, and 200) lie above another, indicating a strong upside trend.

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Alternatively, if the price slips lower below 20-period SMA, the pair may hit 115.00 ahead of 114.50. The ultimate demand zone lies around 113.60-80.

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