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USDJPY Set To Snap Winning Streak As Equities Dive, Key Resistance Holds

JPY
  • USDJPY staged an impressive 3.5% from last week’s lows to print a high of 137.77 earlier on Tuesday. The rally fell just short of noted key resistance at 137.91, the March 8 high and the best level seen in 2023.
  • The pair looks set to reverse this short-term surge on Tuesday, as below estimate US data has placed renewed downward pressure on front-end US yields, prompting a relief rally for the struggling Yen over the course of the US session.
  • Additionally, the pressure on major global equity indices has exacerbated the move with USDJPY seeing a near 1% move to print session lows at 136.32. Despite a moderate recovery in recent trade, the pair looks set to post losses of around 0.6% on Tuesday, snapping a 3-day winning streak that was enhanced by the BOJ decision to affirm their easy policy stance last Friday.
  • The initial support for USDJPY resides at 136.14, the May 1 low. However, more significant support is seen at 135.13, the Apr 19 high and a recent breakout level.
  • The focus now inevitably turns to Wednesday’s FOMC decision, where a 25bp hike could mark the end of the Fed’s hiking cycle. With rates above 5%, and sticky inflation fears offset by the tightening effect of banking sector woes, the FOMC is likely to move to a meeting-by-meeting policy beyond May, while retaining a bias toward further policy firming.
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