FxWirePro: USD/JPY breaks above 200-DMA to hit fresh 3-month high, hawkish Fed Powell’s remarks boost dollar

Chart - Courtesy Trading View 

USD/JPY was trading 0.44% higher on the day at 137.73 at around 04:35 GMT, after closing 0.91% higher in the previous session.

US dollar buoyed after Federal Reserve Chair Jerome Powell warned that interest rates could go higher than expected.

Powell in his testimony before Congress endorsed more rates citing recent strength in inflation and the jobs market and the incoming data from the United States economy.

He warned that it is likely the interest rates will rise above market expectations, and also raised the prospect of a sharper hike in March.

Markets are now pricing in a 50 basis point hike in March, up from prior expectations for 25 bps raise. 

Further, China's mixed trade data and a warning on a potential escalation in Sino-U.S. tensions from China's foreign minister soured risk appetite.

While the country posted a record trade surplus in the January-February period, a sharp drop in imports raised concerns over a sluggish recovery in local demand.

Focus now on the Fed's Beige Book due later on Wednesday and a reading on nonfarm payrolls due on Friday for further impetus.

Technical Analysis:

- USD/JPY has edged past major resistance at 200-DMA

- GMMA indicator shows minor trend is bullish, while major trend is turning bullish

- MACD and ADX support upside in the pair, Chikou span is biased higher

- Momentum is bullish, volatility is high and rising

Major Support Levels: 137.41 (200-DMA), 136.68 (5-DMA)

Major Resistance Levels: 138.17 (Dec 15th high), 138.38 (Upper BB)

Summary: USD/JPY seems to have broken consolidation phase and is set to resume upside. Close above 200-DMA will confirm further bullishness in the pair.