USD/JPY Forecast: Falling yields weigh on the pair

Valeria Bednarik FXStreet

USD/JPY Current price: 110.26

The Bank of Japan will announce its latest decision on monetary policy on Friday.
US Treasury yields retreated from their post-Fed highs, weighing on USD/JPY.
USD/JPY trimmed most of its post-Fed gains but holds above 110.00.

The USD/JPY pair traded as high as 110.81 on Thursday but ended the day in the red around the 110.20 price zone. The pair followed the lead of US government bond yields, which retreated from their post-Fed highs. The yield on the 10-year Treasury note bottomed at 1.47% after peaking at 1.59% for the week. It stabilized around 1.50% in the American afternoon.

Data wise, Japan released bond investment figures, which usually has no impact on price action. Early on Friday, the country will publish May National inflation, foreseen at -0.7% YoY. Additionally, the Bank of Japan will announce the result of its monetary policy meeting. No changes to the monetary policy are expected, although policymakers may extend the pandemic relief program currently up until next September.

USD/JPY short-term technical outlook

The USD/JPY pair has trimmed most of its post-Fed gains, but the bearish potential remains limited at the time being. The 4-hour chart shows that it keeps meeting buyers around a bullish 20 SMA, which advances above the longer ones. Technical indicators have retreated sharply from overbought readings, decelerating their declines just above their midlines. The bearish case could be stronger if the pair loses the 109.50 support level. A critical resistance comes at 110.96, this year high.

Support levels: 109.80 109.35 108.90

Resistance levels: 110.50 110.95 111.20

View Live Chart for the USD/JPY

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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