Fresh highs above 149.00 on dovish BoJ

• BoJ Deputy Shinichi Uchida cooled hopes for an upcoming tightening cycle in Japan.
• The Nikkei 225 posted its highest close since February 1990, adding roughly 750 points.
• USD/JPY on its way to test the 150.00 level, according to the daily chart.

The US Dollar struggles for direction on Thursday, but not against its Japanese rival. The USD/JPY pair trades in the 149.30 region, its highest since last November. Dovish comments from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, stating policy tightening would be gradual and that a rate adjustment would not necessarily trigger a tightening cycle, weighed on the Japanese Yen.

Such comments underpinned local equities. The Nikkei 225 added roughly 750 points or 2% on the day, outperforming its Asian counterparts. The index closed the day at  36,863.28, the highest close since February 1990.

Meanwhile, higher United States (US) government bond yields gave USD/JPY an additional boost. Solid US employment figures pushed the 10-year Treasury yield to a fresh weekly high of 4.16%, as Initial Jobless Claims further blurred the odds for a Federal Reserve’s (Fed) rate cut.

USD/JPY Technical Outlook

The USD/JPY pair trades a handful of pips below its intraday high, paring its run amid the poor performance of Wall Street, reflecting a souring mood. Still, the pair retains substantial gains and has room to test the 150.00 mark in the upcoming sessions.

In the daily chart, the pair bottomed around a directionless 100 Simple Moving Average (SMA) for the week, providing dynamic support at around 147.50. The initial bounce turned into a firmer rally, and the 20 SMA is currently crossing the mentioned 100 SMA, reinforcing the support area. As long as above it, bulls will likely retain control.

Finally, the Momentum indicator recovered from around its 100 level, while the Relative Strength Index (RSI) indicator accelerated north and approaches overbought readings, both reflecting strong buying interest.