It was this pair that gave us early hints of the latest dollar strength, along with EUR/USD, with a break of the March and early May highs leading to the current rally. The break above 138.00 was noteworthy, and while there was a bit of a pullback on Friday last week, that was quickly ignored in trading this week.
USD/JPY daily chart
It has been a fairly straightforward rally for the USD/JPY as there have been a lot of reasons, including technical factors, that have been working in its favor lately.
For example, markets have to reconsider the Fed’s hawkish pricing as economic data remains strong in the US. Added to that is the fact that the Bank of Japan continues to skew any talks about pivotal policy, and this is evident even in today’s remarks made by Ueda here.
Besides, perhaps the most important factor is that Treasury yields are also playing ball and moving higher. This is the main factor on which the pair was built during the past two weeks:
USD/JPY against the 10-year US Treasury bond chart on the hourly chart
As you can see above, even the technical indicators side with the move to the upside as buyers lean on the 100-hour moving average (red line) in this week’s trading to maintain bullish momentum.
The 140.00 level will be a big test though as it is an important technical and psychological level. Possibly matrix bids there but if buyers can get past that, it could lead to a quick rally towards 142.00 next for the pair.