USD/JPY Breaks Resistance as Dollar Extends Recent Advance

Tokyo (Mar 2)  USD/JPY has sliced through resistance at the 113.78 level in today’s trading with a move above the 114.00 handle. The pair is currently holding near 114.21, a gain of 0.45% over Wednesday’s North American close.

The break above 113.78 resistance leaves the next target at the February high established on the 15th at 114.96. Above this level, several layers of resistance exist, the next being January 27’s high at 115.38 followed by the January 19 high at 115.63. A break above this level would suggest a return to the December/January peak is possible.

The dollar is higher for the fifth session in a row in today’s trading, with the latest boost being provided by more hawkish speak from Federal Reserve officials. On Wednesday, FOMC member Lael Brainard hinted at the possibility of an early rate increase.

Earlier in the week, Fed member William Dudley commented that a rate hike is likely “relatively in the near future” and he expects to continue to remove accommodation. In addition, on Tuesday, Fed member John Williams said a rate increase is up for “serious consideration” at the Fed’s March meeting.

At present, according to data from the CME Group, Fed funds futures are pricing in a 66.4% probability of an interest increase at the March meeting. This is up from 35.4% the session prior.

With resistance now within reach and the Stochastic overbought, a period of consolidation in USD/JPY could develop over the near term. Support is now at the recently broken resistance at 113.78. Maintaining above this level will keep in the bias in USD/JPY firmly to the upside.

In today’s US economic news, weekly Jobless Claims are due at 08:30 ET, followed by ISM Services on Friday at 10:00 ET.

In Japan today, Household Spending will be released at 18:30 ET, as will the Jobs/Applications Ratio and National, along with Tokyo, CPI data. Household confidence is due Friday at 0:00 ET.

Source: EconomicCalendar