USD/JPY REACHES A NEW MULTI-YEAR HIGH AND REMAINS OVER 119.00 DUE TO STRONG USD DEMAND

· The USD/JPY gained new offers on Friday as the Bank of Japan maintained its accommodating policy position.

· A little improvement in USD demand offered an extra lift and remained positive.

· A lower risk tone may support the safe-haven JPY while limiting gains in excessive situations.

In the previous hour, the USD/JPY pair continued its continuous intraday advance into the mid-European period, reaching a new multi-year peak in the 119.10-119.15 range.

A mixture of supportive variables aided the USD/JPY pair in regaining positive traction on the penultimate day of the week and extending its recent bullish trajectory over the last two. At the end of the March meeting, the Bank of Japan maintained its dovish position and maintained its ultra-easy policy setting. This, in turn, impacted the Japanese yen, pushing the pair higher amid a slight increase in US dollar demand.

The dollar made a strong return on Friday, reversing the previous day's slump to a one-week low, boosted by the Fed's commencement of the policy tightening cycle. It is worth noting that the US Federal Reserve raised its target fund rate by 25 basis points on Wednesday and signaled that interest rates might be raised at all six remaining meetings in 2022. The greenback was supported by this, as well as rising US Treasury bond rates.

The last run higher appears to have reinforced a near-term bullish split and may have already laid the ground for the USD/JPY pair to appreciate more in the near term. The contrast in the monetary policy outlooks of the BOJ and the Fed lends validity to the positive outlook. However, severely oversold situations on the trend line may prevent traders from putting strong bullish wagers for the foreseeable future.

Furthermore, a softer risk tone, which favors the safe-haven Japanese yen, might add to the USD/JPY pair's limit. The lack of progress in the Russia-Ukraine peace talks dampened investors' desire for riskier assets, resulting in a new leg down in the equities markets. Investors could also opt to remain in the shadows ahead of a meeting between the United State President Joe Biden and his Chinese colleague Xi Jinping.

Nonetheless, the overall trend appears to remain solidly in favor of optimistic investors, albeit the technical structure suggests that the next leg higher should be preceded by other near-term consolidations or a minor retreat. Nonetheless, the USD/JPY pair is poised to settle at its highest possible level since February 2016 and post robust profits for the second week in a row.

TECHNICAL ANALYSIS

USD/JPY