USD/JPY Forex Technical Analysis – Breakout Drives Dollar/Yen into Highest Level Since March 2020

Soaring U.S. Treasury yields and weak demand for Japanese Government bonds are fueling an upside breakout in the Dollar/Yen. The move drove the Forex pair into its highest level since March 26, 2020.

At 08:14 GMT, the USD/JPY is trading 110.233, up 0.391 or +0.36%.

According to Reuters, Japanese government bond yields rose on Tuesday as an auction for two-year notes witnessed weak demand, and yields on U.S. Treasury five-year notes hit a one-year high.

The 10-year JGB yields rose 1.5 basis points to 0.080%, while the 20-year JGB yield rose one basis point to 0.455%. The 30-year JGB yield rose one basis point to 0.640%.

The two-year JGB yield was flat at minus 0.140%, while the five-year yield rose 0.5 basis points to minus 0.100%.

Meanwhile, the U.S. 10-year Treasury yield rose to a 14-month high, widening the spread between U.S. Government bonds and Japanese Government bonds, while driving up demand for the U.S. Dollar.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out the June 5, 2020 main top at 109.849. A trade through 108.407 will change the main trend to down.

The new minor range is 108.407 to 110.268. Its 50% level at 109.338 is the nearest support.

Daily Swing Chart Technical Forecast

Now that the USD/JPY has broken out to the upside, the direction of the Dollar/Yen the rest of the session on Tuesday is likely to be determined by trader reaction to the former main top at 109.849.

Bullish Scenario

A sustained move over 109.849 will indicate the presence of buyers. The move could trigger a further acceleration on an intraday basis with the ultimate target over the near-term 111.715.

Bearish Scenario

A failure to hold 109.849 will be a sign of weakness. It could be telling us that the breakout to the one-year high was fueled by buy stops rather than new buying. It won’t signal a change in trend, but rather a shift in momentum. The first downside target is 109.338.

Side Notes

Soaring Treasury yields are helping to drive the USD/JPY higher. They are controlling the price action and direction. Use the June 10-year Treasury note futures for guidance. Lower futures should keep the upside pressure on the Dollar/Yen.

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