- As the dollar strengthened, the USD/JPY reversed a weekly bearish gap to open higher.
- The Russian-Ukrainian crisis has helped the US dollar’s status as the world’s reserve currency.
- Bond yields dropped sharply in the US, limiting further gains for the dollar and the pair.
Since the Asian session low, the USD/JPY price has struggled to benefit from the strong intraday rebound and was the last trading around mid-115.00s.
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On the first day of the new week, the pair opened with a bearish gap, despite some buying on the decline in the 115.20-115.15 range on broader US dollar strength. During the recent deterioration in the Ukrainian situation, the dollar’s status as a global reserve currency was strengthened.
Russia has been sanctioned by western countries for its invasion of Ukraine, including blocking some banks’ access to the international payment system SWIFT. – East-West conflict broke out.
Falling US Treasury yields, however, have been a headwind for the dollar and have slowed any significant USD/JPY appreciation, at least for the time being. Moreover, recent geopolitical developments have investors convinced that the Fed will adopt less aggressive anti-inflation policies.
In conjunction with a global flight to safety, this led to a sharp drop in US bond yields. Since Friday’s high, around 115.75, USD/JPY has been below. However, before traders prepare for further upside, they should wait for strong follow-on buying.
The upcoming headlines regarding the Russian-Ukrainian saga will affect market risk sentiment in the absence of any major economic news. The US bond yields will also stimulate US dollar demand and boost USD/JPY, allowing traders to take advantage of a few opportunities.
USD/JPY price technical analysis: Bulls running out of steam
The USD/JPY price consolidates above the 20-period SMA on the 4-hour chart. The price remains neutral around the 115.50 zone. Although the key SMAs are pointing higher, the price structure does not support bulls at the moment.
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A widespread up bar closing in the middle suggests that the bulls have no follow-through momentum. Hence, the rangebound behavior is expected to continue at current levels. On the upside, 116.40 remains a stiff resistance while 115.00 will be the immediate support.
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Saqib Iqbal
