USD/JPY spikes to fresh 24-year top, bulls looking to build on momentum beyond 137.00 mark

• USD/JPY scaled higher for the fourth straight day and shot to a fresh 24-year peak on Wednesday.
• Fed Chair Jerome Powell’s hawkish remarks boosted the USD and remained supportive of the move.
• Retreating US bond yields might turn out to be the only factor capping the upside for spot prices.

The USD/JPY pair prolonged a multi-day-old ascending trend and gained follow-through traction for the fourth successive day on Wednesday. The buying interest picked up pace during the early North American session and pushed spot prices to a fresh 24-year high, with bulls now aiming to conquer the 137.00 round-figure mark.

The US dollar caught fresh bids and shot to a one-week high after Fed Chair Jerome Powell reaffirmed bets for a more aggressive policy tightening by the US central bank. Speaking at the ECB Forum in Sintra, Powell said that the US economy is in strong shape and is well-positioned to handle tighter policy. He further added that the Fed remains focused on getting inflation under control and the market pricing is pretty close to the dot plot.

This helped offset a downward revision of the US Q1 GDP, showing that the economy contracted by 1.6% against the 1.5% fall estimates previously, and provided a goodish lift to the buck. Furthermore, Powell's hawkish remarks validated a big divergence in the policy stance adopted by the Fed and the Bank of Japan. This, in turn, weighed on the Japanese yen and further contributed to the strong bid tone surrounding the USD/JPY pair.

That said, declining US Treasury bond yields has resulted in the narrowing of the gap between the US-Japan rate differential. Apart from this, worries about a possible global recession might offer some support to the safe-haven JPY and hold back traders from placing fresh bullish bets around the USD/JPY pair, at least for the time being.

Nevertheless, the bias still seems tilted firmly in favour of bullish traders and any meaningful pullback might still be seen as a buying opportunity. Even from a technical perspective, move beyond the previous YTD peak might have set the stage for an extension of the USD/JPY pair's upward trajectory towards the 138.00 round-figure mark.

Technical levels to watch