USD/JPY rises further above 137.50 to five-day highs amid higher yields and risk appetite

• Japanese Yen among weakest currencies on Monday amid risk appetite.
• US yields move modestly to the upside ahead of US CPI and FOMC decision.
• USD/JPY to face resistance below 138.00.

The USD/JPY is trading at the highest level since last Wednesday at 137.52, up almost a hundred pips on Monday ahead of critical events on the back of a stronger US Dollar.

Dollar up despite Wall Street

Equity prices are rising on Monday. The Dow Jones gains by 0.89% and the Nasdaq climbs by 0.41%. At the same time, US yields are moving to the upside supporting the US Dollar. The Japanese Yen is among the worst performers hit by yields and risk appetite.

The USD/JPY appears to be finally moving away from the 136.60. A daily close around current levels would be the highest since late November, creating a bullish sign for the pair for a test of the 20-day Simple Moving Average that waits at 138.30. Before that area, many resistance levels are spotted between 137.50 and 138.00.

Anyway, volatility in any direction seems to be the game in town for the next few days considering the critical events ahead, including data and central bank meetings.

On Tuesday, the US Consumer Price Index is due with a decline expected to 7.3% (y/y) from 7.7%. “Last week, PPI came in higher than expected and confirmed our concerns that inflation is likely to prove to be much stickier than the markets expect.  We see upside risks for CPI this week, especially since last month’s lower-than-expected readings were due to a statistical quirk”, argued analysts at Brown Brother Harriman.

The FOMC will announce its monetary policy decision on Wednesday. A 50 basis points rate hike is expected. The meeting includes new macroeconomics forecasts and Powell’s press conference.

On Thursday, the European Central Bank and the Bank of England will deliver their policy statements with rate hikes of 50 basis points expected from both central banks.  The Bank of Japan meets next week.

Technical levels