USD/JPY Forecast: Bulls maintain the pressure, 107.00 at sight

USD/JPY Current price: 106.39

• Soaring US Treasury yields and falling equities keep leading currencies.
• Japanese data came in slightly better than expected, indicated slowing economic progress.
• USD/JPY is technically bullish near fresh 2021 highs, could run past 107.00.

The USD/JPY pair hit 106.42, a fresh 2021 high, as the dollar’s demand extended into the Asian session, alongside equities’ collapse. The main Asian indexes lost over 3%, although European ones are just marginally lower, as retreating US government bond yields cooled the sell-off. It also put a cap to USD/JPY appreciation, which retreated from the mentioned high. The yield on the benchmark 10-year Treasury yield peaked at 1.61% on Thursday, currently at 1.47%.

Japan published February Tokyo inflation data, with the headline figure printing at -0.3% YoY, as expected. The core reading, which excludes fresh food prices, also printed at -0.3% YoY. Industrial Production was up 4.2% MoM in January but contracted 5.3% compared to a year earlier. Finally, Construction Orders were up by 14.1% in January, although Housing Starts decreased by 3.1%.

The US will publish January Personal Income and Personal Spending and the final estimate of the February Michigan Consumer Sentiment Index, foreseen at 76.5.

USD/JPY short-term technical outlook

The USD/JPY pair holds on to most of its weekly gains, and the risk remains skewed to the upside in the near-term. In the 4-hour chart, the pair keeps developing above all of its moving averages, with the 20 SMA heading firmly higher above the larger ones. Technical indicators stand near overbought readings, lacking clear directional strength. The downside seems well limited by the 105.80 area, as buyers keep surging on approaches to the level.

Support levels: 105.80 105.35 104.90

Resistance levels: 106.50 106.95 107.30

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