As USD advances to new highs near 104.20, USD/JPY continues to stay bullish as the three-day upside momentum approaches a two-decade high flashed last month.
In its most recent monetary policy meeting, the BOJ committed to continuing with its easing policy in a bid to manage the economy. Kuroda maintained that he would leave interest rates intact and continue with its asset purchase program. On the contrary, The Fed took a different path last week. In its statement, the bank decided to deliver the biggest rate hike in over 20 years. It also signaled that it would continue hiking interest rates by 50 basis points in the coming meetings. While that planned divergence in the monetary policy of the two banks may continue for the next coming months, the USD/JPY pair is expected to move to 135, the highest level since 2002.
There isn't any major market-moving economic data due for release from the US, leaving the USD/JPY pair at the mercy of the USD price dynamics/US bond yields. Apart from this, traders will take cues from the broader market risk sentiment to grab short-term opportunities. The focus, however, would remain glued to the release of the latest US consumer inflation figures on Wednesday.
In the short term, the pair‘s momentum has improved further and a clear break of 131.225 would open the way for the USD to advance further to 131.65. Overall, only a breach of 130.00 (’strong support level was at 129.5) would indicate that upward momentum has eased.
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