USD/JPY Forex Forecast – Under Pressure as Treasury Yields Tumble

The Dollar/Yen is facing challenges following a significant drop in US Treasury yields, which has been triggered by a US banking crisis.

The dollar fell on Monday amid heightened expectations that the Federal Reserve will be less aggressive with monetary policy as authorities stepped in to limit the fallout from the sudden collapse of Silicon Valley Bank.

At 11:52 GMT, the USD/JPY is trading 133.586, down 1.485 or -1.10%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $69.10, up $0.64 or +0.94%.

US Regulators Step in to Calm Financial Markets

The US government announced several measures early in the Asian trading day. All SVB customers will have access to their deposits starting on Monday. The authorities also said depositors of New York’s Signature Bank, which was closed on Sunday by the New York state financial regulator, would be made whole at no loss to the taxpayer.

The market turmoil from the SVB collapse led investors to speculate that the Fed will no longer raise interest rates by a super-sized 50 basis points this month.

Fed Rate Hike Plans Dampened as Yields Tumble

Goldman Sachs said it no longer expects the Fed to deliver a rate hike at its March 22 meeting.

This sudden change in interest rate expectations is causing a radical change in the value of the US dollar.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 23 basis points at 4.3575%, on track for its biggest three-day decline since Black Monday in 1987.

JGB’s Soar to Three-Month High

Japanese government bonds rallied on Monday, sending the benchmark 10-year yield to a nearly three-month low, as investors flocked to the safest assets amid jitters over the fallout from Silicon Valley Bank’s collapse.

Japanese government bonds have rallied as investors flock to the safest assets amid jitters over the fallout from Silicon Valley Bank’s collapse.

To summarize, the value of the US dollar is being affected by the challenges faced by the USD/JPY due to the US banking crisis, which has caused a significant drop in US Treasury yields and resulted in a radical change in interest rate expectations.

Daily USD/JPY Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at 132.950 will signal a resumption of the downtrend. A move through 137.911 will change the main trend to up.

Early suport is at 132.700 and 131.339. Resistance is 133.992, followed by a retracement zone at 135.431 – 136.016.

Daily USD/JPY Technical Forecast

Trader reaction to the Fibonacci level at 133.992 will determine the direction of the USD/JPY on Monday.

Bearish Scenario

A sustained move under 133.992 will indicate the presence of sellers. If enough downside momentum is generated, it is possible that the selling may extend towards the range of 132.700 to 131.339.

Bullish Scenario

A sustained move over 133.992 will signal the presence of buyers. This could trigger a surge into the short-term retracement zone at 135.431 – 136.016.