USD/JPY Forecast: Yields continue to provide support

Valeria Bednarik FXStreet

USD/JPY Current price: 108.54

Progress in the US Congress on a stimulus bill underpins the greenback.
US Treasury yields resumed their advance and challenge their recent highs.
USD/JPY is bullish despite overbought, could reach the 109.00 price zone.

The USD/JPY pair trades near this year high at 108.64, as the dollar advances alongside government bond yields. The yield on the benchmark 10-year Treasury note stands at 1.60%, not far from its YTD high of 1.62%. The greenback started the week down amid weekend news indicating progress in the US stimulus bill and spurring some risk-appetite. Nevertheless, equities edged lower in Asia, while European indexes hold within positive levels but retreating from intraday highs.

Japan macroeconomic calendar included the January Trade Balance, which posted a deficit of ¥-130.1 billion. The preliminary estimate of the Leading Economic Index beat expectations, up to 99.1, while the Coincident Index came in at 91.7. Finally, the February Eco Watchers Survey on the current situation printed at 41.3, missing expectations while the outlook improved to 51.3. The US has a light start to the week, as it will only publish January Wholesale Inventories.

USD/JPY short-term technical outlook

The USD/JPY pair is overbought but still bullish. The 4-hour chart shows that moving averages maintain their bullish slopes, with the 20 SMA accelerating north well above the larger ones. Technical indicators aim to resume their advances, developing within extreme levels. The pair could reach the 109.00 level should yields keep rising, but the risk of a bearish corrective decline increases if the rally extends beyond that level.

Support levels: 108.05 107.70 107.30

Resistance levels: 108.65 109.00 109.40

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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