USD/JPY fluctuates ahead of 132.00 on an upbeat mood, soft USD

• The USD/JPY seesaws nearby the 132.00 figure though it remains unable to reclaim it.
• Traders’ mood improved as US equities turned green, while the US Dollar continued to edge lower.
• USD/JPY Price Analysis: To remain sideways around 132.00 ahead of Thursday’s US CPI report.

The USD/JPY clings to gains following the release of the US Federal Reserve (Fed) Chair Jerome Powell’s Speech at Sweeden Riksbank, which did not acknowledge monetary policy, but rather focused on central bank independence. Therefore, risk appetite continues to improve as Wall Street futures shed some losses. At the time of writing, the USD/JPY is trading at 132.06, registering modest gains of 0.07%.

USD/JPY seesaws around 131.90s on mixed sentiment

Investors’ mood was negative ahead of the Fed’s Chair Powell speech. According to newswires, equities pullback was attributed to Fed’s Bostic and Daly comments on Monday, seen as hawkish. Nevertheless, the financial market did not respond to a “reprice” of a less hawkish Fed, meaning that US Treasury bond yields continued to fall, ignoring Fed officials’ comments.

Data-wise, an absent US economic docket keeps the USD/JPY trading unchanged. However, comments by Fed policymakers emphasizing the central bank’s resolution to curb inflation slightly weighed on investors’ mood. Fed’s Daly and Bostic added that rates would need to be above the 5% range and would need to be held higher for longer, at least until 2024.

As mentioned above, the odds for a 25 bps rate hike by the Federal Reserve remain at 77.2%, while for 50 bps stand at 22.8%.

Earlier in the Asian session, a hot Tokyo CPI print on an annual basis, around 4%, failed to underpin the Japanese Yen (JPY). So, in the short term, further USD/JPY upside could be expected.

The US Dollar Index (DXY), which tracks the buck’s value against a basket of six currencies, including the Japanese Yen (JPY), drops 0.06%, at 103.244. in the meantime, the US 10-year Treasury bond yield, which positively correlates with the USD/JPY, is gaining almost four bps, up at 3.573%, underpinning the USD/JPY.

USD/JPY Price Analysis: Technical outlook

Therefore, the USD/JPY bias remains neutral-to-downwards, though, in the near term, it could remain sideways ahead of Thursday’s US inflation report. For the USD/JPY to shift bullish, it would need a daily close above the 20-day Exponential Moving Average (EMA) above 133.38, which could underpin the major to test the 200-day EMA at 134.74. Otherwise, a fall beneath January’s 9 daily low of 131.30 could open the door for a test of the YTD low of 129.50.