US dollar index
Details of the latest CFTC Positioning Report have been publicized. The report indicates that traders have reduced their net shorts on the US Dollar, matching levels last seen in December 2020. This is a reflection of the strength the USD has garnered in the wake of rising long-term bond yields, and progressive vaccination campaigns that are going on nationwide without a hitch.
The 10-year bond yields in the US continue to trade near 12-month highs, and the price projection provided by Credit Suisse for the yield to end the year at 1.82% seems to have been a wake-up call to traders bullish on the greenback. The higher bond yields are also putting pressure on the Japanese Yen, and the number of gross short positions on the Yen is seen to have been rising since mid-January levels. The CFTC Positioning report also indicates that net longs on the JPY are at their lowest levels so far in 2021.
The USD/JPY is currently trading off intraday highs at 109.143, or 0.11% higher.
The pair has broken above the key resistance zone at 108.468/108.819 and is pushing towards the 8 June 2020 high at 109.704. A break above this level brings 110.137 into the picture as a potential target, having been the point at which highs were seen on 13 February 2020. If bulls continue to push the price above this pre-pandemic high, we could see the pair touching off 110.586 (22 May 2019 high).
On the other hand, a faltering in buying momentum retests the ceiling of the former resistance (now support) zone at 108.819. 107.824 becomes a new target if bears can force the USD/JPY below this zone, with the potential of hitting 106.998 also on the cards. This outlook will depend on a drop in the long-term bond yields as a supporting factor.
