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USD/JPY spikes to fresh multi-year high


11 March 2022

A combination of factors pushed USD/JPY to a fresh multi-year top on Friday. Signs of stability in the equity markets dented demand for the safe-haven JPY. Thursday’s strong US CPI print underpinned the USD and remained supportive. The USD/JPY pair continued scaling higher through the early European session and jumped to a fresh five-year peak, around the 116.80 region in the last hour.

The pair prolonged this week's bullish trajectory and gained strong follow-through traction for the fifth successive day on Friday. Signs of stability in the global financial markets undermined the safe-haven Japanese yen and acted as a tailwind for the USD/JPY pair amid the underlying bullish sentiment surrounding the US dollar.

The buck continued drawing some support from Thursday's strong US consumer inflation figures, showing that the headline CPI accelerated to a new 40-year high in February. The data reinforced bets for an imminent start of the policy tightening cycle by the Fed in March, which was evident from the overnight spike in the US Treasury bond yields. The combination of supporting factors pushed the USD/JPY pair through the previous YTD high and took along some short-term trading stops placed near the 116.35-116.40 region. Hence, the ongoing strong move up could further be attributed to some follow-through technical selling and might have already set the stage for additional gains.

That said, concerns about the risk of a further escalation of tensions between Russia and the West should cap the optimistic move in the markets and warrant caution for bulls. In fact, US President Joe Biden is set to call for an end of normal trade relations with Russia on Friday, alongside the Group of Seven nations and European Union leaders.

Nevertheless, the bias still seems tilted in favour of bullish traders and supports prospects for a move towards reclaiming the 117.00 round-figure mark. Traders now look forward to the Prelim Michigan US Consumer Sentiment Index, due later during the early North American session. The focus, however, will remain on the incoming geopolitical headlines.

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