- USD/JPY is better bid despite risk-off in Asian stocks.
- Fed pushes back on aggressive rate cut views.
USD/JPY’s corrective rally continues and the exchange rate is now hovering at session highs near 107.50.
The RSI on the daily chart is bouncing up from oversold territory, signaling scope for further gains.
Meanwhile, the 4-hour chart is reporting a bullish divergence of the RSI.
As a result, the pair could rise to resistance at 107.73 on the 4-hour chart.
The gains in USD/JPY may come as a surprise to many. After all, the Asian equities are reporting losses and still the anti-risk Japanese Yen is losing ground.
It appears the Asian FX desks are buying US dollars in response to Federal Reserve officials tempering aggressive rate cut expectations.
On Tuesday, Fed’s Bullard said that the current US economic conditions do not warrant a 50 basis point rate cut in July. Further, Chairman Powell’s said the central bank is assessing whether a cut in borrowing costs is required.
Trend: Oversold bounce