USD/JPY en route to 108.50 amid US yields bull run

The USD/JPY is trading at around 108.45 up .0.77% on Monday as the rising US bond yields is the main theme of the day.  

USD/JPY is trading almost at 10-weeks high (108.95) as the rally in bond yields takes center stage. The 10-year treasury note yield traded as high as 2.99% on Monday’s trading. The last time it reached that level in 2013, stocks went under pressure and oil declined sharply as pointed out by Reuters. A higher rate environment can be detrimental to companies as the cost for borrowing money increase and debts become more expensive.

The US stock markets are trading sideways continuing the consolidation of last week up move and geopolitical tensions are for now on the backseat. Therefore lessening the demand for the Japanese yen which is seen as a safe-haven currency bought in times of market uncertainty or political turmoil. 

Looking ahead, the main macroeconomic data of the week for the US dollar is the Personal Consumption Expenditure (PCE) on Friday which is the favorite gauge of inflation of the Federal Reserve Bank. A strong deviation to the upside will reinforce rate hike expectations. The US GDP will be on the same day. The first quarter US GDP is expected to rise to 2.3% on a quarterly annualized basis.

Earlier on Monday, the housing data came better than expected increasing 1.1% over the month in March while manufacturing Purchasing Managers Index (PMI) advanced to 56.5, the highest level in last 43 months. On the other hand, the manufacturing activity in Chicago regional area fell to 0.10 in March, coming out below expectations. However, the tier-two data is largely overshadowed by the surge in US bond treasury yields. 

USD/JPY daily chart 

The trend is bullish. Support is seen at the 107.00 handle and at 105.65 swing low while resistances are priced in at the 109.00 and 110.00 handle.