Introduction:
The USD/JPY currency pair has been trading in a narrow range around the 134.00 level in the Asian session. However, investors are betting on the US Dollar to gain strength and push the pair above the resistance level. This is due to the market’s expectations that the Federal Reserve will continue its policy-tightening process.
Factors Driving the USD/JPY Pair:
Several factors are driving the USD/JPY pair, including the strength of the US economy, the outlook for monetary policy, and geopolitical tensions.
Firstly, the US economy has been showing signs of strength in recent months, with unemployment falling and GDP growing at a healthy pace. This has boosted investor confidence in the US Dollar, as they believe that the economy will continue to perform well in the future.
Secondly, the outlook for monetary policy is also contributing to the strength of the US Dollar. The Federal Reserve has been gradually tightening its monetary policy by raising interest rates and reducing its balance sheet. This has helped to strengthen the US Dollar, as investors expect the Fed to continue its policy-tightening process.
Lastly, geopolitical tensions are also affecting the USD/JPY pair. Japan and the US are both major players in the global economy, and any tensions between the two countries could have an impact on the currency pair. For example, the recent trade tensions between the US and Japan have led to a decrease in the value of the Japanese Yen, which has helped to boost the USD/JPY pair.
What to Expect in the Coming Days:
In the coming days, the USD/JPY pair is expected to break above the resistance level of 134.00. This is due to the continued strength of the US Dollar, as investors back the Federal Reserve’s policy-tightening process. Additionally, the outlook for the US economy remains positive, which should help to further strengthen the US Dollar.
However, investors should be aware of potential risks that could affect the USD/JPY pair. For example, any unexpected geopolitical tensions could lead to a decrease in the value of the USD/JPY pair. Additionally, if the Federal Reserve signals a pause in its policy-tightening process, this could also lead to a decrease in the value of the US Dollar.
Conclusion:
The USD/JPY pair is expected to break above its current resistance level in the coming days, as investors back the US Dollar due to the Federal Reserve’s policy-tightening process. However, investors should be aware of potential risks that could affect the currency pair, such as unexpected geopolitical tensions or a change in the Federal Reserve’s monetary policy.
