Title: USD/JPY looks to the Fed for resumption of upside leg

May 04, 2022 03:45AM ET

By: AnalysisWatch

All in all, the situation for USD/JPY is quite simple at the moment.

The pair has also rallied strongly in the wake of the rise in Treasury yields, with a broader dollar rally adding to the upside push from 120.00 to 130.00 over the past two months.

We are now holding at the key level, and buyers remain calm, even if they are not yet convinced of further upside.

Everything now depends on what the U.S. Federal Reserve (Fed) will decide today, with special attention to the reaction of the bond market.

In my view, it will be difficult for the Fed to be any more restrictive than it already is. But the least it can do is maintain the same level of hawkishness that we've seen in recent weeks, which has led to the flight to the bond market and a general dollar rally.

The key mark to watch in government bonds is the 3% mark in 10-year yields. If we break above this mark, it should help solidify the dollar's recent momentum and trigger the next uptrend in USD/JPY.

If we consolidate above 130.00, 135.00 is the next important level to watch for such a breakout.

For now, this is all conjecture. It all depends on the Fed later today. Tick tock, tick tock.