Why USD/JPY traders should watch the US10Y [Video]
![Why USD/JPY traders should watch the US10Y [Video]](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/USDJPY/japanese-yen-bills-money-from-japan-63035511_XtraLarge.jpg)
In this video, I discuss the crucial relationship between the USD/JPY currency pair and the US bond market, particularly the ten-year treasury yields. I highlight recent interventions by the Bank of Japan to strengthen the yen, especially when the USD/JPY approaches the 160 level, which seems to be a trigger point for the Bank of Japan and the Ministry of Finance to intervene.
However, I point out that relying on continuous intervention by Japan's monetary authorities isn't a sustainable strategy, drawing a parallel to the Swiss National Bank’s experience in 2015. They eventually had to give up defending the Euro-Swiss franc floor, illustrating that central bank interventions have their limits.
Therefore, I suggest that the most probable source of yen strength is likely to come from the US bond market rather than Japan. If US ten-year yields start to fall—indicating a strong buying interest in bonds—this scenario creates a conducive environment for the USD/JPY to drop. This relationship is clearly visible on the charts, where you can see the USD/JPY closely tracking movements in the ten-year yields. So, as we move forward, keep an eye on the US ten-year yields for signs of yen strengthening, as this is likely to be a more reliable indicator than hoping for continued intervention from Japan.
Author
Giles Coghlan LLB, Lth, MA
Financial Source
Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.
