USD/JPY flat lined near 2-month highs, what’s next?

The Dollar-Yen pair jumped to 114.37; its highest level since March 15 on the back of risk-on in the equities and hawkish Fed speak. The currency pair trades flat lined around 114.30 levels this Thursday morning.

The government data released today showed a current account surplus of JPY 2.91 trillion ($25 billion) in March, marking the 33rd straight month of black ink. The data has not had any major impact on the Yen pairs so far.

Focus on Fed speak

The Fed speak so far this week has been hawkish, with the likes of Rosengren calling for three more rate hikes this year. The policymakers also stand united on the need to normalize the Fed balance sheet.

Fed’s William Dudley and Fed’s Evans are more likely to toe the hawkish line later today. That could keep the USD well bid.

Risk-on keeps Yen under pressure

The drop in the Wall Street’s fear gauge - VIX index to 24-year low and the slide in the bond market volatility to the lowest since 2014 means there is little incentive for the investors to buy the haven assets like the Japanese Yen.

Overall, the spot looks set to extend the four-day winning streak, although a corrective pullback cannot be ruled out due to overbought conditions on the technical charts. A potential pull back in the equities could weigh over the pair as well.

USD/JPY Technical Levels

A break above 114.54 (23.6% Fib R of Nov low - Dec high) would expose resistance at 115.50 (March high) and 115.97 (Jan 2016 low). On the downside, breach of support at 113.99 (23.6% Fib R of 2011 low - 2015 high) would open up downside towards 113.70 (5-DMA) and 113.05 (100-DMA).