USD/JPY: On the rise, but 30-day MA hurdle is intact

• Holds well above 106.00 on hawkish Fed expectations.
• Need to clear 30-day MA (moving average) in a convincing manner.

The USD/JPY pair rose to 106.61 yesterday, possibly due to hawkish Fed expectations and a rise in the short-duration treasury yields.

As of writing, the spot is flat-lined around 106.50. Tokyo markets are off, hence it has been a dull Asian session for the USD/JPY pair. That said, the activity may pick up pace in Europe if the European desks load up on dollars on speculation the Fed may revise the terminal rate (neutral rate or peak rate) higher.

The USD/JPY pair may rise above the 30-day MA (currently seen at 106.78) in a convincing manner if the Fed sees scope for faster rate hikes and revises higher the 2019-2020 rate forecasts. On the other hand, the USD will likely be offered across the board if the central bank leaves long-term rate forecasts unchanged.

USD/JPY Technical Levels

A move above 106.78 (30-day MA) would expose resistance at 107.29 (March 13 high). A daily close above the same would signal a short-term bearish-to-bullish trend change and could yield rally to 108.28 (Jan. 26 low). On the downside, breach of support at 106.37 (10-day MA) would open doors for a sell-off to 105.60 (March 16 low) and 105.25 (March 2 low).