As a result of a multi-day siege, buyers of the USD/JPY pair still consolidated within the 119th figure. Last Friday, traders updated the 6-year price high, reaching 119.41. The last time the pair was at this height was in February 2016. And, apparently, this is not the limit: the mood remains bullish, and the U.S. dollar index is growing again.
All this suggests that the USD/JPY bulls are set to reach the next target: 120.00, which corresponds to the upper line of the Bollinger Bands indicator on the daily chart. It is likely that this target will be achieved in the coming days, given the overall fundamental background for the pair.
The degree of tension in the financial markets did not decrease over the weekend – neither the telephone conversations between Joe Biden and Xi Jinping, nor the ongoing negotiations between Russia and Ukraine helped. These fundamental factors put pressure on the dollar last week, however, due to the lack of an actual result, the dollar bulls again raised their heads. The anti-risk sentiment is growing again, acting as a "fuel" to strengthen the greenback.
It should be noted here that geopolitical factors are a priori unreliable: everything can change at any moment. The negotiation process between the Russian Federation and Ukraine is not public in nature, so it is rather difficult to judge its dynamics. Market participants draw certain conclusions only from the mean comments of the negotiators and from numerous press insiders, which quite often contradict each other. Therefore, now no one can say with certainty whether the negotiations will drag on or whether the parliamentarians are about to reach the finish line, agreeing on the main points of a compromise solution.
According to some media reports, the parties are still far from forming a common position on some issues. However, according to other sources, the key points of the future agreement have already been agreed upon - now the representatives of the parties are allegedly reconciling legal nuances and terminology.
Which version is closer to the true state of affairs is unknown. Therefore, traders cannot decide on the vector of movement of dollar pairs. If for almost the entire last week the dollar was under pressure (due to the weakening of anti-risk sentiment), then last Friday the greenback began to gain momentum again (due to the lack of any results). It is difficult to say in which direction the pendulum will swing this week, since literally one statement by the negotiating group can turn the situation around 180 degrees.
And yet, given the previous rhetoric of the parties, it is not necessary to expect any concrete result in the near future. Most likely, the negotiation process will continue further, but the very fact of negotiations will no longer become a catalyst for reducing anti-risk sentiment. Consequently, the dollar will be afloat again in the foreseeable future, dominating the entire market, including in pair with the yen.
In addition, the U.S. currency has recently been receiving support from the Fed, whose representatives voice quite hawkish comments. Suffice it to recall Board Governor Christopher Waller, who recently allowed a 50-point rate hike in May (assuming the geopolitical situation stabilizes). Against the backdrop of such statements, Goldman Sachs experts revised their forecast regarding the pace of monetary tightening. In their opinion, this year the Fed will raise the rate by 25 points 7 times (in this part, the forecast has not changed), and next year 5 times. The bank's analysts point to a high probability of further growth of inflation in the U.S. against the backdrop of lower unemployment. Also, Goldman Sachs experts do not exclude the option of a 50-point rate hike following the results of the March meeting.
Thus, the current fundamental picture speaks in favor of further growth of the USD/JPY pair. The growth of anti-risk sentiment and strengthening of "hawkish" expectations allow dollar bulls to feel quite confident in all pairs, including the pair with the Japanese currency.
From a technical point of view, the situation is as follows. On all "higher" timeframes, the pair is either between the middle and upper lines, or on the upper line of the Bollinger Bands indicator, as well as above all the lines of the Ichimoku indicator, which has formed a strong bullish signal. This indicates a clear advantage of the upward movement. The bullish momentum is so strong that it is impossible to talk about any large-scale price correction yet. The nearest target of the upward movement is located on the upper line of the Bollinger Bands indicator on the daily chart, i.e. at around 120.00. The pair's upward trend has not exhausted itself, so it is advisable to use the downward price pullbacks as a reason to open longs.