USD/JPY Bulls Dominate Market: Upward Trend Intact

USD/JPY is pulling back today after being rejected just below the 142.00 level, which it hadn't reached since November 2022. The demand for the safe-haven Japanese Yen is being driven by risk aversion, causing the pair to decline despite a general rebound in the US Dollar. Bank of Japan Governor Ueda has stated that Japan's headline CPI of around 3.5% is primarily influenced by external factors that are pushing up costs, making it difficult for Japan's monetary policy to control.

Meanwhile, the US Dollar Index (DXY) is maintaining a relatively narrow trading range above 102.00, as there are no significant catalysts on the horizon.

According to economists at ING, the short-term outlook for the US Dollar suggests that it may remain weak against most currencies except the Japanese Yen, given the Bank of Japan's consistently dovish stance. Consequently, yen-funded carry trades are likely to remain popular. From our perspective, we anticipate that USD/JPY will continue its bullish rally with a fresh surge in bullish sentiment.

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