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James Hyerczyk

The Dollar/Yen surged for a second session on Friday as rising U.S. Treasury yields widened the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a more attractive investment.

The 10-year U.S. Treasury yield climbed on Friday even after the jobs report for December showed an unexpected loss.

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The rise in bond yields came after Federal Reserve Vice Chairman Richard Clarida said he expects the central bank to maintain the pace of its asset purchases through the balance of 2021.

On Friday, the USD/JPY settled at 103.966, up 0.152 or +0.15%.

A rising benchmark Treasury yield helped flip the USD/JPY higher at mid-week and the rally continued into Friday’s close as investors reacted to the political clarity provided by the victory for the Democrats in this week’s runoff elections for Georgia’s two Senate seats. The 10-year rate broke above 1% for the first time since March earlier this week.


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on January 7 when buyers took out the previous main top at 103.899. The main trend changes to down on a move through 102.593.

The short-term range is 105.677 to 102.593. Its retracement zone at 104.135 to 104.499 is the next upside target zone. Trader reaction to this area should set the tone in the market next week.

The minor range is 102.593 to 104.090. Its 50% level at 103.342 is potential support. Since the main trend is up, buyers are likely to come in on a test of this level. This 50% level will move up as the USD/JPY move higher.

The main range is 107.049 to 102.593. Its retracement zone at 104.821 to 105.347 is another potential upside target. This zone is controlling the near-term direction of the NZD/USD.


Short-Term Outlook

The key area to watch early next week is the short-term retracement zone at 104.135 to 104.499. Trader reaction to this area should set the tone.

Look for a weak tone to re-emerge if 104.135 develops into resistance. This could trigger a pullback into 103.342. Overtaking 104.499 will indicate the buying is getting stronger with the next potential upside target coming in at 104.831 to 105.347.

For a look at all of today’s economic events, check out our economic calendar.
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