- USD/JPY can't profit from a bullish Dollar move as US treasury yields show weakness
- Bullish case is weakened in the technical picture
USD/JPY looked poised for a bullish move above the recent high of 112.17 yesterday, having bounced up from the ascending trendline support in the Asian trading hours.
The breakout, however, remained elusive even though the Dollar gained ground against most major currencies. EUR/USD fell to three-week lows on Tuesday, while Gold printed a four-month low of $1,266. USD/JPY, however, remained below 112.00 and is currently trading 111.81, having hit a high of 111.98 earlier on Wednesday.
The Australian Dollar tanked in the Asian session on Wednesday following the dismal Aussie first-quarter inflation release at 01:30 GMT. That too failed to put a bid under USD/JPY and so did the decline in the AUD/JPY cross.
The USD/JPY pair is struggling to find takers, possibly due to the weakness in the treasury yields. The 10-year yield fell two basis points on Tuesday even though the US New Homes Sales came out 692K annualized, bettering market expectations to show the housing sector is recovering from the temporary slowdown.
The stocks also traded in the green on Tuesday, with the S&P 500 closing at record high levels. The risk on also failed to lift treasury yields.
10-year treasury yield
As seen above, the upper edge of the falling channel pattern is proving a tough nut to crack since April 17. More importantly, the repeated rejection could be followed by a pullback, in which case, USD/JPY will likely drop to the recent higher low of 110.84, as created on April 10.
USD/JPY daily chart
The weak follow-through to the defense of the ascending trendline seen in the Asian session on Tuesday has weakened the bullish case and shifted risk in favor of a drop below the previous day’s low of 111.65. Acceptance below that level would expose the recent bullish higher low of 110.84.
The bullish view put forward by both the rising trendline (higher lows) and the upside break of the bearish expanding channel seen on April 11 would be reinforced if the pair jumps above 112.17 in the next 24 hours. That could be followed by a rally to 113.00.
The bullish break above 112.17, however, needs to be backed by a falling channel breakout on the US 10-year yield, else the move above 112.17 may end up trapping buyers on the wrong side of the market.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold climbs above $2,340 following earlier drop
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.