The Japanese yen was on a losing streak last week, falling by 3% versus the dollar. The currency is now seen plunging below 140 against the greenback.
Last week, the FOMC Minutes became the main driving force for the dollar. Based on the outcome of the report, most FOMC officials advocate for the aggressive Federal Reserve.
In light of hawkish sentiments, the 10-year Treasury yield skyrocketed, driving the greenback further up.
Last week, the dollar advanced against its main counterparts, and the US dollar index climbed by 2.3%.
The Japanese yen fell the most against the dollar last week. On Friday, JPY plummeted to 137, the level unseen since the end of July, while the greenback soared on hawkish statements by Fed policymakers.
According to the Fed officials, who spoke last week, the battle against inflation is not over yet, which means the regulator should remain hawkish.
President of Federal Reserve Bank of Richmond Thomas Barkin said the central bank aims for quick and sharp rate hikes.
Focus on the Jackson Hole symposium
On Monday, the greenback is still bullish. In early trading today, the US dollar index hit the 5-week high of 108.26.
The rise came amid growing 10-year Treasury yields. During the Asian session on Monday, the yield exceeded 3% for the first time since July 21.
The spike came on hawkish expectations ahead of the Federal Reserve's annual Jackson Hole symposium this week.
The event will unfold on August 25-27. At this point, the market is anticipating Chairman Jerome Powell to stress the need for further monetary tightening.
Meanwhile, the Japanese yen is facing pressure due to a stronger Treasury yield as the currency is extremely sensitive to it.
Earlier today, USD/JPY traded at 137.30, up by 0.2%. Japanese strategist Masafumi Yamamoto sees the pair edging higher and hitting the July high of 139 in the upcoming days.
Bloomberg experts suggest that USD/JPY could ascend even more this week. The greenback may well break above the 140 barrier against the yen, they estimated.
At the same time, pressure on the Bank of Japan may increase due to a fall in the yen to the mark of 140, leaving it no other choice but to intervene. In such a case, the yen may somewhat strengthen.
Technical outlook for USD/JPY
The 14-day RSI is gradually moving above the middle line, indicating potential growth.
The bullish impulse could extend should USD/JPY break through horizontal resistance at around 137.50.
Another target is seen at 138.00 and the 138.87 high, recorded on July 21.