On Tuesday, January 25, 2022, the greenback edges near its two-week high amid the Ukrainian crisis.
- Investors return to USD as fears of military conflict in Ukraine ignite.
- DXY is edging closer to its two-week highs.
- Investors also appeared hesitant to make large predictions ahead of the key FOMC meeting.
USD/JPY fundamental forecast
The dollar moved higher on Tuesday, closing in on its two-week high, as investors sought safe-haven assets amid hostilities between Russia and the West over Ukraine and as the Federal Reserve’s policy meeting concluded.
The dollar index is trading at 96.12, up 0.26 % from its two-week high of 96.135 set on Monday.
So far, the safe-haven yen has shed 0.10 % against the US dollar, keeping within striking distance of one-month highs.
A positive rise in US Treasury bond rates functioned as a tailwind for the US dollar since the Fed is expected to tighten policy more quickly. This, in turn, was considered as a crucial driver in the USD/JPY pair’s slight uptick.
In the latest move to reassure apprehensive NATO partners in the face of a Russian military buildup in Ukraine, the US military placed some 8,500 troops on standby to deploy to Europe if required.
Rising geopolitical uncertainty over Ukraine, as well as fears that rising borrowing prices might affect company earnings outlooks, continued to weigh on investors’ enthusiasm. This was reflected in a generally negative tone in the equity markets.
Fed’s tightening policy
The Fed is slated to announce its decision on Wednesday, which should give new information on when the Fed will begin its policy tightening cycle. This will immediately impact USD price dynamics and offer a new directional push to the USD/JPY pair.
Key data Releases from the US
On the calendar front, we have Consumer Confidence and Richmond Manufacturing Index. Tomorrow we have the all-important Fed’s decision, which can strongly impact USD/JPY.
Key data Releases from the JP
We have BOJ Summary of Opinions from Japan today. Earlier today, we had BOJ’s Core CPI.
Traders will be watching for the publication of the Conference Board’s US Consumer Confidence Index, which is scheduled for later in the early North American session. This, together with US bond rates, will drive USD demand.
Aside from that, the wider market risk sentiment may generate some short-term trading opportunities in the USD/JPY pair.
USD/JPY technical analysis: key levels in action
USD/JPY gained 0.10% during the European session and trading 114.102. USD/JPY is slightly above the 100-day moving average on the daily chart, but the MACD is pointing downwards. The pair is looking to pass its December 22nd high.
The pair is now seeking to maintain its position above 114.00. This point is a pivot point for the pair. If it goes below this level, it can go towards the next support at 113.98; it’s yesterday’s low.
On the upside, the pair’s resistance is at 114.27. If the pair can break above this level, the next resistance lies at 114.54, the level it reached on November 19.