The US dollar was up against the Japanese yen in today’s early trading Asian session. The improvement in strength of the dollar comes amid the rise in the US stocks after favorable earning report from US companies.

U.S. stocks has rose to another record high as traders have geared for a string of earnings reports from technology heavyweights which includes Facebook Inc., also keeping in mind inflation concerns and rising COVID-19 risks.

Various sectors like Consumer discretionary, energy and materials sectors led the S&P 500 to an all-time high. PayPal Holdings Inc. has rose after the company said it isn’t pursuing an acquisition of Pinterest Inc., ending days of speculation over a potential US$45 billion deal. Tesla Inc. made an advancement after receiving an order for 100,000 cars from Hertz Global Holdings Inc.

Principal Global Investors Chief Strategist Seema Shah. said “This year, broad market indices have benefited from robust earnings growth—the rising tide lifts all boats adage has been in full effect.” “But as the economy slows and market conditions become more challenging, selectivity will be key. Staying overweight equities, with a focus on factors such as quality, will be increasingly important for investors aiming to balance portfolios in the market environment ahead.”

Fed officials are set to wind down their $120 billion-a-month bond-purchase program in November, but queries on how soon inflation pressures will fade are creating more uneasiness inside the central bank. Fed’s move also favors a cautious optimism for US dollar.

Looking on the yen, The yen’s recent slip to a nearly four-year low against the U.S. dollar coupled with a surge in U.S. oil prices to a seven-year high had threatened to cut into household spending even as it still feels the impact of COVID-19.

The yen’s weakening led to the increase in price of imported products, such as oil, which puts Japan at serious risk at a time when the resource-scarce county saw import prices rising at the fastest pace in four decades last month. Whereas, Wholesale prices have also been gaining sharply, which weighs on the the tolerance of Japanese companies that have opted to absorb higher costs.

USD/JPY 4 Hour Chart:

Support: 113.46 (S1), 113.22 (S2), 112.98 (S3).

Resistance: 113.93 (R1), 114.16 (R2), 114.40 (R3).

Amidst all the catalysts favoring the US dollar against the Japanese yen, we expect a bullish trend for USD/JPY.