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USD/JPY Holds On Tight Close to Its Multi-Year High, Balanced Over 119.00 Benchmarks

Holding On Tight to High Points Amid Crisis

The USD/JPY currency pair has prolonged its consolidative price movement throughout the middle of the European session and maintained its confinement in a range just a few points under the multi-year high that was newly set as markets closed on Friday. The last observation of the pairs trading activity was in the vicinity of the 119.20 to the 119.25 regions.

After the latest solid run-up of more than 450 pips coming from the monthly low points – about the 114.56 regions – the softer risk tone directed some safe-haven funds in the way of the Japanese yen and it was a cap to the USD/JPY currency pair. The escalating situation between Russia and Ukraine has put a lid on the latest optimistic movement in the global market and it has benefitted most traditional safe-haven assets.

USD/JPY price chart. Source TradingView

The defiance of the government of Ukraine in rejecting Russia’s call for it to surrender the city of Mariupol for it to have humanitarian corridors accessible for civilians is further escalating matters. This happened following the advance of Russian forces into the besieged port city after one of the most deadly rocket strikes took place on Saturday. This had a consequence on tempering investors’ overall appetite for perceived riskier assets.

Hopes Hold Out for Diplomatic Resolutions

However, investors continue to maintain hope over an eventual peace deal to be reached between the two warring parties. To state further facts, the foreign minister of Turkey was quoted to have said that both parties were coming close to an agreement on very critical issues. This recent news as well as the different views of monetary policies adopted by both the Bank of Japan and the US Federal Reserve are expected to act as a tailwind in the interest of the USD/JPY currency pair. 

It should be recalled that the US Federal Reserve announced the beginning of its monetary policy tightening cycle last week where it further signaled that there is a possibility of increasing interest rates further at every of its remaining six meetings this year. Some influential Federal Open Market Committee members have supported the case pushing a more aggressive monetary policy position by the United States central bank in order for it to sufficiently fight the rising inflation rates.

The hawkish position of the Federal Reserve maintained its support for an increased American Treasury bond yield. This has further opened gaps between the Japanese and US government ten-year bond yields while there is a more dovish Bank of Japan policy. The basic background supports the possibility for more gains for the USD/JPY currency pair, although over-buying relative strength indexes call for caution.  

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