USD/JPY Forecast: In no man's land, needs 10-yr T yield above 2.4 percent


The Dollar-Yen pair is up 0.58% or 65 cents at $113.30 this Friday on renewed tax reform hopes.

The US Senate's decision to approve 2018 budget proposal opened doors for GOP to enact the tax overhaul code without democratic support. This is good news for Trump administration, which has failed repeatedly to repeal and replace Obamacare.

Tax cuts are inflationary, hence, the Treasury Yields strengthened after Senate's decision hit the wires. The 10-yr yield and the 30-year yield is up at least 4 basis points, while the 2-yr yield is flat lined. Thus, the yield curve (difference between the 10-yr yield and the 2-yr yield) has steepened to 80 basis points.

The uptick in the 10-year Treasury Yield is lifting the USD/JPY pair. However, the benchmark yield is still well below the recent high (and strong resistance) of 2.4%. So, it should be too early to call an upside break on the USD/JPY pair.

The USD/JPY technicals suggest the pair is currently trading in no man's land, marked by the recent high of 113.44 and the weekly low of 111.65.

Daily chart

The chart shows-

  • 50-MA and 200-MA crossover
  • RSI is bouncing off the neutral 50 line
  • The 100-MA is still sloping downwards and the ADX line shows weakness in the trend
  • Trendline drawn from the March high and July high is seen offering resistance at 113.70

View

  • The resistance at 113.70 could be put to test today.
  • A sustained move higher is likely only after the 10-year yield breaks above 2.4 percent.
  • The downward sloping 100-MA and the flat ADX line suggests gains could be capped around 113.70 levels.
  • On the downside, a break below the weekly low of 111.65 would open doors for a quick-fire drop to 110.73 (weekly 100-MA).

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD rises above 1.21 amid better market mood

EUR/USD has been extending its gains, recapturing 1.21 as the market mood improves. The German ZEW Economic Sentiment beat estimates with 61.8 points. Treasury Secretary nominee Janet Yellen's testimony is awaited.

EUR/USD News

GBP/USD clings to 1.36 ahead of Yellen's testimony

GBP/USD is edging above 1.36 as markets eagerly Treasury Secretary nominee Janet Yellen's testimony. The UK parliament is set to process the Brexit deal as Britain ramps up its vaccination campaign.

GBP/USD News

Gold recovers further from multi-week lows, climbs to $1845 region

Gold gained positive traction for the second consecutive session on Tuesday. A modest USD pullback was seen as a key factor that benefitted the metal. The risk-on mood, rallying US bond yields might cap gains for the commodity.

Gold news

Breaking: Ethereum explodes to new yearly high, validating upward price action

Ethereum has ascended to new yearly highs after breaking the recent peak achieved in January. The flagship altcoin is trading at $1,372 amid the push for gains eyeing $1,400. 

Read more

US Dollar Index looks side-lined near 90.70

The greenback, when tracked by the US Dollar Index (DXY), appears to have moved into a consolidative range around the 90.70 level following the closing bell in Asian markets.

US Dollar Index News

Forex Majors

Cryptocurrencies

Signatures