The strengthening dollar has pushed the dollar up against the yen

In early European trading on Wednesday, the dollar rallied to a new one-and-a-half-year high near 159.45 against the yen, before retreating slightly. The yen's overall weakness among major currencies reflected growing concerns about the outlook for Japanese politics and policy.

Much of the market jitters over politics in Japan stem from news that Prime Minister Sayaaki Takaichi may dissolve parliament early to call a general election. Takaichi is expected to formally express his intention to dissolve parliament on Wednesday, paving the way for a new round of elections.

Political uncertainty often undermines investors' confidence in yen assets, which has been an important factor in the recent continued pressure on the yen.

At the same time, the market still holds high expectations that Japan may adopt more accommodative monetary and fiscal policies this year, which further limits the room for the yen to rally. inhycmForeign exchange platforms allow investors to keep an eye on the trading opportunities brought about by such policy changes.

Under the dual influence of the weakening of the risk-off attribute and the dovish policy expectation, the yen continued to underperform major currencies.

In terms of the US dollar, the overall US inflation data was in line with expectations, supporting the dollar's continued strength.

The latest data showed that the US CPI rose by 2.7% year-on-year in December, and the core CPI rose by 2.6% year-on-year, both in line with market forecasts. This strengthens the market's judgment that the Federal Reserve will keep interest rates unchanged in the short term.

From a technical perspective, the USD/JPY pair maintained a clear bullish structure as a whole, with the exchange rate continuing to operate in an uptrend channel and the moving average maintaining a bullish arrangement, indicating that the medium-term uptrend remains intact.

The recent K-line has closed near the previous high, indicating that bullish sentiment is dominant, but the high-level entities have converged, suggesting that the chasing momentum has begun to slow down. In terms of kinetic energy indicators, the 14-week RSI rose to 70.85 and entered the overbought area, indicating that the short-term rally is hot, and there is a possibility of phased consolidation or high volatility, but there is no clear reversal signal yet.

Under the premise that the trend has not been destroyed, the pullback is more likely to be regarded as a bullish correction rather than a trend reversal. The important support below the 158.00 integer level is used as a key support. As long as the area is not effectively broken, the USD/JPY as a whole will still remain on the high side. The 160 integer level remains an important psychological resistance level above.

Editorial opinion:

Overall, the rise of the dollar against the yen is more driven by a combination of fundamentals and policy expectations. Political uncertainty and easing policy expectations in Japan continue to weigh on the yen, while the resilience of inflation in the United States provides support for the dollar. For attentionforeign exchange marketFor investors, HYCM Forex offers a variety of currency pair trading options, which is conducive to capturing such market fluctuations.

However, from a technical perspective, USD/JPY is already at a high level and the momentum indicators are overbought, and the risk of short-term chasing higher is rising. The follow-up trend still needs to focus on the political progress of Japan and the Federal Reserve's policy signals. Without new catalytic factors, the exchange rate is more likely to enter a high volatility rather than a rapid unilateral upside.