USD/JPY Rises on Rebound in US Treasury Yields

Key Takeaways

• Dollar/Yen higher on rebound in US Treasury yields
• Market sentiment remains delicate, uncertainty persists
• US interest rate futures suggest peak, stability concerns emerge

Overview

On Tuesday, the Dollar/Yen is higher, driven by a significant rebound in U.S. Treasury yields during the prior session. Although the currency pair showed initial strength in today’s session, the market sentiment remains delicate and the uncertainty surrounding the global financial system is causing traders to feel apprehensive about the Federal Reserve’s potential response during their upcoming two-day meeting.

At 08:37 GMT, the USD/JPY is trading 132.049, up 0.740 or +0.56%. On Monday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $70.90, up $0.26 or +0.37%.

US Interest Rates Near Peak, Stability Concerns Emerge

U.S. interest rate futures suggest that rates have peaked or will soon reach their peak, with concerns over stability taking priority over inflation-fighting ahead of the Fed meeting.

Although the Swiss government-backed buyout of Credit Suisse by UBS has temporarily eased worries about European financial stability, the collapse of some Credit Suisse bondholders has had a ripple effect on bank debt.

The rapid spread of trouble from regional U.S. banks to a significant systemic bank in Europe has rattled the markets.

Daily USD/JPY Technical Analysis

The main trend is down according to the daily swing chart. A trade through 130.544 will signal a resumption of the downtrend, while a move through 129.814 will reaffirm the weakness. The main trend will change to up on a trade through 137.911.

The nearest support is a Fibonacci level at 131.339. The closest resistance is a pair of 50% levels at 132.569 and 132.700.

Daily USD/JPY Technical Forecast

Trader reaction to the Fibonacci level at 131.339 is likely to determine the direction of the USD/JPY on Tuesday.

Bullish Scenario

A sustained move over 131.339 will indicate the presence of buyers. This could trigger a surge into the resistance cluster at 132.569 to 132.700. Since the main trend is down, sellers are likely to come in on a test of this area. However, overtaking 132.700 could trigger a near-term acceleration into 133.992.

Bearish Scenario

A sustained move under 131.339 will signal the presence of sellers. This could lead to a retest of 130.544, followed by the main bottom at 129.814.