USD/JPY Rejected above $111.00 As US Indices Turn Bullish On Fed Chair Rhetoric
- USD/JPY retreated lower after powering through the 111.00 level.
- The yen remains under pressure against the Euro with EUR/JPY bouncing off two month lows.
- Gold is struggling for direction after last week sell-off with bounce back off two-month lows stalling
- US indices edged higher on the FED chair hinting current loose monetary policy could remain in place.
The USD/JPY experienced strong resistance after powering through the 111.00 level. The rally to one year highs came at the backdrop of renewed dollar strength following hawkish FED last week. Furthermore, a rebound in the US. Treasury yields after a slow start to the week is another factor offering support to the dollar, consequently pushing the pair high.
After the recent spike high, the 111.09 level has emerged as a critical resistance level curtailing further upside action.
Amid the pullback, USD/JPY upside action remains well supported, with the 110.50 acting as a critical support level.
USD/JPY remains bullish given the U.S. dollar, which continues to strengthen across the board against the majors. The U.S. dollar recovering to two-month highs should continue to affirm the upside momentum amid the small correction in what appears to be an action of profit-taking.
However, Japan’s economic recovery should continue to offer support to the yen, something that could curtail further gains on the USD/JPY. The Leading Economic Index rose past the 103.00 level in April, signaling economic recovery.
EUR/JPY bounce back
The Japanese yen also remains under pressure against the euro going by the bounce back in the EUR/JPY cross. The pair has bounced back, registering three days of gains after coming under pressure last week and plunging to two-month lows.
The pair has recovered from support at the 129.90 level powering through the 132.30 level as the Japanese yen remains under pressure. Above the 132.20 level, bulls could push the pair above the 132.80 mark, a critical resistance level.
Gold recovery stalls
The gold bounce back has stalled with the XAU/USD pair trading in a tight trading range amid a lack of direction in the commodities market. The precious metal has come under immense pressure in recent days on the U.S. dollar powering to two-month highs amid a surge in inflation in the U.S. and expectation of rate hikes.
The $1786 mark has emerged as a critical resistance level above which bulls are finding tough. XAU/USD has struggled to close above the level as bears remain in control after last week’s sell-off.
On the downside, the $1772 is a critical support level above which gold is well supported for a potential bounce back. However, a breach of the support level could pave the way for bears to push gold lower, with the $1760 level the probable next stop on the downside.
The dollar rebound should continue to cap any upside attempts on the bullion. However, the precious metal is benefiting from the FED chair’s weaker rhetoric on monetary policy. Rising Covid load case in Asian regions continues to fuel risk aversion, something that should benefit gold.
US indices bounce back
Major indices are flirting with record highs on the FED chair in the equities market, reiterating that higher inflation is transitory. The Dow was up 0.2% on Tuesday to 33,945 as the S&P 500 advanced 21.65 points to 4,246. Tech heavy NASDAQ was up 0.8% to 14 253.
The catalyst pushing indices higher is rhetoric from Powell indicating that the FED is not in a rush to start tapering on its losing monetary policy. After last week's sell-off, the sentiments calmed the market on concerns that tapering of bonds and higher interest rates could be on the way.
In the cryptocurrency market, BTC/USD returned above the $30,000 mark powering through the $34,000 level after tanking to five months lows of 28,778 on Tuesday. Amid the pullback, the flagship is still down by more attn. 50% from it's all-time highs.
Bitcoin remains under pressure given the sweeping regulatory crackdown that continues to weigh on sentiments in the market. China cracking down on trading and mining should continue to weigh on its price heavily despite the recent bounce back.
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