Market Overview

USD/JPY Forecast: Bulls Need US 10-yr Yield Above 3.04%

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This article originally appeared on FXStreet.

  • USD/JPY struggles to take out key descending trendline hurdle.
  • 10-year treasury yield needs to find acceptance above 3.04 percent, in which case the USD/JPY will likely see a sustained move above 110.04.
  • An above-forecast US CPI reading could push yields higher.

Dollar's rebound from the ascending trendline, though encouraging, lacks the vigor to cut through the 5-month long falling trendline, sloping downward from the November high and December high.

Daily chart

usdjpy_d1_05-10-2018_1054-636615266923866037.png

As seen in the chart above, the pair has failed to capitalize on the break above the falling trendline. Further, only a close above 110.04 - 38.2 percent Fibonacci retracement of Jan/Mar sell-off - would signal a continuation of the rally from the recent low of 104.63.

The breakout has remained elusive, largely due to US 10-year treasury yield's inability to find acceptance above the 3 percent mark.

US 10-year treasury yield weekly chart

10-year_yield-636615267224674970.png

Moreover, the weekly chart shows the yield needs to clear the January 2014 high of 3.041 percent in order to revive the bull run in the USD/JPY pair.

Such a move looks likely if the US April consumer price index (CPI) due today at 12:30 GMT prints above the estimate of 0.3 percent month-on-month rise. Moreover, an above-forecast reading would boost odds of faster Fed rate hikes.

On the other hand, a weaker-than-expected inflation could weigh over treasury yields and the US dollar. That said, only a break below 2.717 percent would confirm a bearish trend reversal in USD/JPY pair.

Posted-In: FXStreetNews Forex Treasuries Markets

 

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