The USD/JPY pair catches fresh bids following the previous day’s brief pause and climbs to a fresh YTD top during the first half of the European session on Tuesday. The pair is currently placed around the 136.65-136.70 area and seems poised to prolong its upward trajectory witnessed since the beginning of this month.
A fresh leg up in the US Treasury bond yields, bolstered by hawkish Fed expectations, helps revive the US Dollar demand, which, in turn, acts as a tailwind for the USD/JPY pair.
The Japanese Yen (JPY), on the other hand, is weighed down by the overnight dovish remarks from the incoming Bank of Japan (BoJ) Governor Kazuo Ueda. Addressing the upper house of the parliament, Ueda said that the benefits of the BoJ’s stimulus outweigh its side effects. He also stressed the need to maintain the ultra-loose policy to support the fragile economy and reinforced that the BoJ isn’t seeking a quick move away from a decade of massive easing. This, in turn, is seen as another factor that provides an additional lift to the USD/JPY pair.
The market sentiment remains fragile amid worries about economic headwinds stemming from rising borrowing costs and geopolitical tensions. Nevertheless, the fundamental backdrop suggests that the path of least resistance for the USD/JPY pair is to the upside. Bulls, however, might wait for some follow-through buying beyond the 137.00 mark before placing fresh bets and positioning for further gains.
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