The USD/JPY exchange rate held steady on Tuesday morning as the US dollar index (DXY) rebound continued. The pair was trading at 148.61, much higher than last week’s low of 145.92 as the focus now shifts tothe next actions by the Bank of Japan.

The USD/JPY pair rose as the DXY index made a strong bullish breakout after last week’s key events. These events included the Federal Reserve’s decision,  the strong non-farm payrolls (NFP) data, and a Jerome Powell interview.

In its first decision of the year, the Fed decided to leave interest rates unchanged between 5.25% and 5.50% as most analysts were expecting. The status quo was necessary because, according to the Fed, the economy is doing well while inflation has remained above the 2% target for a while.

This view was confirmed by the strong US jobs numbers. According to the Labor Department, the economy created over 350k jobs in January while wages continued rising. Higher wages, coupled by strong consumer confidence, tend to stir inflation.

Jerome Powell, the Fed Chair, confirmed that the Fed was not in a hurry in an interview with 60 minutes. He cited these macro numbers to insist that the economy was doing well, as evidenced by the 3.3% growth in the fourth quarter.

All these factors, together with the strong ISM manufacturing and non-manufacturing PMI numbers have led to more USD demand. Investors believe that the US economy will continue doing better than other countries for a while. This view was also confirmed by the OECD in a report on Monday. The organization expects the US to be one of the best-performing major economies this year

The next important USD/JPY catalyst is the action of the Bank of Japan, which is set to move from negative interest rates this year. If this happens, it will be the first time in over a decade that the bank has hiked interest rates.

USD/JPY chart by TradingView

The 4H chart shows that the USD to JPY exchange rate has bounced back in the past few days. It has risen to the key resistance level at 148.77, where it has struggled to move above since January 19th. As such, there are worries that it has formed a double-top pattern whose neckline is at 145.92. 

The USD to yen pair has moved above the 50-period moving average and the Ichimoku cloud. Most notably, it now sits at the ultimate resistance of the Murrey Math Lines. Therefore, more upside will only be confirmed if it moves above the resistance at 148.77. A move above that level will see it continue rising as buyers target the key resistance point at 150.

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