USD/JPY steadies above 108.00, set for best week since May 2020

  • USD/JPY is off highs but remains comfortably above the 108.00 level.
  • The pair is set for its best week since May 2020, having largely traded as a function of US government bond yields.

USD/JPY has backed off from earlier session highs of above the 108.60 mark in recent trade and, as the end of the trading week draws closer, seems content to range around the 108.25 region. Though off highs, USD/JPY seems to be attracting a lot of buying interest ahead of the 108.00 level, which is keeping things supported for now.

On the day, the pair is up 0.3% or just over 30 pips. That means that USD/JPY is on course for its largest weekly gain since May 2020 (of 1.7% or about 180 pips). That means JPY sits at the bottom of this week’s G10 FX performance table, with only CHF (down 2.4% on the week) doing worse.

Driving the day

USD/JPY appears to have traded as a function of US government bond yields, or as a function of US/Japanese rate differentials which tend to move in line with US bond yields given the fact that Japanese government bond yields hardly move given the BoJ’s Yield Curve Control policy (where it target’s 10-year JGB yields at 0.0%). The US 10-year yield spiked as high as 1.625% on Friday, its highest level since early February 2020 (i.e. before the pandemic went global and triggered a financial market panic), in wake of a much stronger than anticipated US Labour Market Report. However, the move did not last long, with yields quickly dropping back to pre-data levels in the mid-1.50s%.

Looking ahead, US/Japan rate differentials look set to remain a key driver of the USD/JPY currency cross. The outlook for US bond yields is pretty bullish; Friday’s jobs data has boosted expectations for a strong post-Covid-19 rebound that were already sky-high given the rapid vaccine rollout, recent easing of Covid-19 restrictions and expectations for further fiscal stimulus. Thus, the outlook for USD/JPY also looks pretty good.

As long as nothing scuppers the US’ path to recovery, which it looks like it won’t  - vaccine-resistant Covid-19 variants have been a concern recently but according to the latest results from AstraZeneca, their vaccine appears to be effective against the Brazilian variant – and as long as the Fed don’t suddenly surprise markets with more QE or dovish adjustments to their existing programme, there is no reason to think that US bond yields can’t continue higher. Indeed, the main driver of higher yields this week (and the main driver of USD/JPY strength) was Fed Chair Jerome Powell’s failure to signal Fed readiness/eagerness to combat rising yields.

There is always the possibility, however, that the only reason why Powell failed to talk about what the Fed could do to stop yields rising or when they might act is that the FOMC has not yet had the chance to come to agreement on this issue. The FOMC meeting in two weeks’ time would offer such an opportunity. A dovish surprise could see bond yields hit and USD/JPY drop. But that is two weeks away and a lot can happen in that time.


Today last price 108.29
Today Daily Change 0.40
Today Daily Change % 0.37
Today daily open 107.89
Daily SMA20 105.76
Daily SMA50 104.63
Daily SMA100 104.47
Daily SMA200 105.44
Previous Daily High 107.95
Previous Daily Low 106.96
Previous Weekly High 106.69
Previous Weekly Low 104.92
Previous Monthly High 106.69
Previous Monthly Low 104.41
Daily Fibonacci 38.2% 107.57
Daily Fibonacci 61.8% 107.34
Daily Pivot Point S1 107.25
Daily Pivot Point S2 106.62
Daily Pivot Point S3 106.27
Daily Pivot Point R1 108.24
Daily Pivot Point R2 108.59
Daily Pivot Point R3 109.22



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.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD extends slide to 1.1300 as dollar gathers strength

EUR/USD continues to stretch lower and tests 1.1300 handle ahead of the American session. The greenback outperforms its major rivals as safe-haven flows dominate the financial markets. Investors await Markit's preliminary US Manufacturing and Services PMI data. 


GBP/USD tests 1.3500 on risk aversion, weak UK data

GBP/USD continues to edge lower and trades at its weakest level in more than two weeks near 1.3500. The data from the UK revealed that the private sector's business activity expanded at a softer pace in early January than it did in December.


Gold holds near $1840 ahead of key Fed meeting as geopolitical worries rise

Gold is holding near $1840 despite the stronger USD on a heightened safe-haven bid amid geopolitical concerns. What is expected to be a very hawkish Fed meeting will test gold’s resilience this week.

Gold News

Crypto carnage continues to unfold

Bitcoin price has witnessed a massive crash over the past week, undoing the gains seen since July 25. Ethereum, Ripple and other altcoins have followed suit, experiencing an even worse crash. 

Read more

Nvidia extends losses after Bitcoin’s overnight flash crash

NVDA investors are getting used to seeing the colour red after a year in 2021 when all they saw was green. On Friday, shares of NVDA fell by 3.21%.

Read more