USD/JPY sticks to BoJ-inspired strong gains, trades above 136.00 post-US PCE Price Index

• USD/JPY rallies over 300 pips intraday and spikes to its highest level since March 10.
• The BoJ’s dovish stance weighs heavily on the JPY and prompts aggressive buying.
• Bets for another 25 bps lift-off in May underpin the USD and contribute to the rise.
• The US Core PCE Price Index fails to provide any meaningful impetus to the major.

The USD/JPY pair builds on its strong intraday rally and climbs to its highest level since March 10, around the 136.40 region during the early North American session. Spot prices, however, retreat a few pips following the release of the US macro data and trade around the 136.00 mark, still up over 1.5% for the day.

The Japanese Yen (JPY) turns out to be the worst-performing G10 currency on Friday in reaction to the Bank of Japan's (BoJ) decision to leave its ultra-loose monetary policy settings unchanged. The Japanese central bank also made no tweaks to its yield curve control (YCC) by a unanimous vote, while the BoJ Governor sounded dovish during the post-meeting press conference. This, along with resurgent US Dollar (USD) demand, provides a goodish lift to the USD/JPY pair and further contributes to the intraday rally of over 300 pips.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, touches a two-and-half-week high amid firming expectations for another 25 bps lift-off at the next FOMC meeting in May. The USD, however, eases a bit after the US Bureau of Economic Analysis reported that the US Personal Consumption Expenditures (PCE) Price Index declined more than expected, to 4.2% on a yearly basis in March from 5.1% previously. The Core PCE Price Index (the Fed's preferred inflation gauge), meanwhile, edged lower to 4.6% from 4.7%.

This, along with a sharp intraday declining in the US Treasury bond yields, keeps a lid on any further gains for the Greenback. Apart from this, the risk-off impulse - as depicted by a generally weaker tone around the equity markets - lends some support to the safe-haven JPY and acts as a headwind for the USD/JPY pair amid slightly overbought oscillators on hourly charts. Nevertheless, spot prices remain on track to register strong gains for the third successive week, also marking the fifth week of a positive move in the previous six.

Technical levels to watch