The Japanese Yen (JPY) continued its strong rally in intraday trading after strong domestic Gross Domestic Product (GDP) figures reaffirmed speculations that the Bank of Japan (BOJ) will raise interest rates further. Moreover, narrowing US-Japan interest rate differentials proved to be another factor supporting demand for the lower-yielding JPY. Moreover, the prevailing US Dollar (USD) selling bias kept the USD/JPY pair pressured just above mid-151.00s, or near one-week lows touched during the early Asian session on Monday.
That said, concerns over US President Donald Trump’s retaliatory tariffs might hold JPY bulls from placing aggressive bets. Additionally, a growing acceptance that the Federal Reserve (Fed) will maintain its hawkish stance and keep interest rates on hold for a longer period underpinned the USD, which, in turn, helped limit the downside for the USD/JPY pair. That said, the fundamental backdrop seems tilted in favour of JPY bulls and suggests that the path of least resistance for the pair remains to the downside.