Japanese yen's slide against the U.S. dollar and euro is probably far from over, so foreign exchange traders should not be fooled by USD/JPY's pause after its recent surge.
The dollar held close to a two-decade high against its main rivals on Wednesday as investors waited for fresh U.S. inflation data to assess how aggressively the U.S. Federal Reserve will have to tighten monetary policy to keep rising prices in check. nL2N2X30LU
Fundamental and technical factors point to further USD/JPY gains in the days and weeks ahead.
As the Fed and Bank of Japan have been treading divergent paths, USD/JPY's downside is limited and instead the likelihood remains for eventual bigger gains to test the 2002 peak of 135.20 (EBS).
In March and April USD/JPY saw the biggest one-month gains since November 2016, highlighting the underlying bullish market structure.
Fourteen-month momentum remains positive, reinforcing the underlying technical upside potential.
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