USD/JPY Forex Technical Analysis – Rising Treasury Yields, Appetite for Risk Could Trigger Surge Over 112.335

The Dollar/Yen rose to its highest level since December 20 last week as demand for higher risk assets jumped amid a more upbeat outlook on some of the major economies of the world and the prospect of a trade deal between the United States and China. A sharp rise in U.S. Treasury yields in reaction to stronger-than-expected U.S. fourth-quarter Gross Domestic Product report also drove up demand for the U.S. Dollar.

For the week, the USD/JPY settled at 111.933, up 1.264 or 1.14%.

Benchmark 10-year U.S. Treasury yields rose nearly 10 basis points last week, the biggest weekly increase in four months. On Friday, the yield surged to 2.759 percent, a four-week high. This helped widen the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a more attractive investment.

Stocks rose for a tenth week adding to further evidence of increasing demand for higher-yielding assets.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. However, momentum is trending higher. A trade through 114.210 will change the main trend to up. A move through 105.180 will signal a resumption of the downtrend.

The main range is 114.210 to 105.180. Its retracement zone at 110.761 to 109.695 is controlling the near-term direction of the USD/JPY. This zone is new support. Holding above this zone will help sustain the upside bias.

Weekly Technical Forecast

Based on last week’s close at 111.933 and the upside momentum, the first target this week is a downtrending Gann angle at 112.335. Trader reaction to this angle will determine the direction of the USD/JPY this week.

Bullish Scenario

A sustained move over 112.335 will indicate the presence of buyers. If this move creates enough upside momentum then look for a drive into a pair of Gann angles at 113.180 and 113.273. The latter is the last potential resistance angle before the 114.210 main top.

Bearish Scenario

The inability to overcome 112.335 will signal the presence of sellers. If this move is able to generate enough downside momentum then look for a possible break into the major Fibonacci level at 110.761.

General Outlook

Treasury yields and appetite for risk will continue to be the biggest influences on the USD/JPY this week. If yields continue to rise along with equities then look for a breakout over 113.273.