In the early European session on Wednesday, the USD/JPY currency pair reached a two-week high, continuing a five-day upward trend.

To place new bets, bulls need to see spot prices rise above the 200-day Simple Moving Average (SMA).

Recent hawkish remarks by several Federal Reserve officials have helped push the USD/JPY pair to a peak that hasn’t been seen in nearly two months. Interest rates aren’t restrictive enough, Cleveland Fed President Loretta Mester said on Tuesday, and the central bank isn’t prepared to preserve them. This supports market expectations that the Federal Reserve will continue raising interest rates, which in turn strengthens the Greenback.

The BoJ’s dovish attitude has put pressure on the JPY. It is too soon to consider exit plans from the massive stimulus programme, BoJ Governor Kazuo Ueda warned last week. This and a slight improvement in US equities futures have helped the USD/JPY continue its upward trajectory. A modest decline in yields on US Treasury bonds, however, may discourage bulls.

The virtual environment, however, indicates that USD/JPY will increase. Therefore, the monthly swing high of 137.75-137.80 may be tested again. A new bullish breakout would occur if buying activity continued past the yearly peak, now around the 137.90 area attained in March. Traders are currently focused on data from the US housing market, specifically Building Permits and Housing Starts.

Trade Idea:

Consider going long on USD/JPY if the pair breaks above the 200-day SMA, targeting a retest of the monthly swing high at 137.75-137.80. Monitor US housing market data for potential catalysts.