USD/JPY Headed for Fresh 7 Year Highs
USD/JPY took out the 120 level with ease today despite a lack of U.S. data. Talk of tighter monetary policy drove the U.S. dollar higher against most of the major currencies. This morning Dallas Fed President Fisher said that early and gentle rate increases would be wise. This follows yesterday’s comments from Fed President Lacker who believed that June was an attractive time to raise rates. Based on these comments and our general outlook for US monetary policy, we believe that USD/JPY will hit and exceed last year’s high of 121.85. U.S. rates are on the rise and stocks are performing well, making U.S. assets even more attractive. A softer retail sales report on Friday could sap some of the gains but we view any pullback in USD/JPY as an opportunity to buy at lower levels.
Taking a look at the daily chart of USD/JPY, the break above 120 puts the currency pair on track for further gains. However there are a 2 main resistance levels to be mindful of – 120.80 and 121.85. These levels halted previous rallies in the pair. Support is at 120.