USDJPY Extends Gains-Is A Return to 150.0 Imminent?

Summary:
• USDJPY is on the rise after Thursday's forecast-beating PPI and initial jobs claims data, and the lack of data from Japan supports more gains

USDJPY solidified its three-day gains on Friday New York session, rising by 0.41% to 148.90. The US dollar is propelled upward by the latest readings of Producer Price Index (PPI) and jobs data. The yen, meanwhile, lacks support, as no high-impact data came from Japan in the last three sessions. The US dollar’s strength is underlined by the trajectory of the dollar index, DXY, which has returned above 103.00, at weekly highs.

The latest major development from Japan is that the country’s largest trade union has reached an agreement with largest employers to raise salaries by 5.28%. This is the largest pay hike in the country in the last three decades, and will influence Bank of Japan’s next interest rate decision. The BoJ has maintained ultra-low interest rates since 2007, and next week could be a major turning point for Japan’s economy and the yen if it exits it.

The new wage agreement certainly increases the likelihood that the BoJ will raise interest rates next week or in April. However, BoJ Governor last week stated that there were still some underlying weaknesses in the world’s fourth-largest economy, and that the policymakers would need stronger evidence of stability before reversing NIRP. Therefore, the latest salary raise may not be enough to trigger such a decision, considering that the majority of Japanese workers aren’t employed by large companies.

The US dollar meanwhile, has support from rising US Treasury yields. Yields on benchmark 5-year bonds and 10-year bonds have risen in the last two days and are above 4.31% as of this writing.

Technical analysis

The pivot mark for USDJPY is at 148.35 and the buyers are in control, as shown by the RSI momentum indicator. If the buyers keep the price above the pivot, the resultant momentum could break the resistance at $149.00, setting the stage for testing 149.25 in extension. On the other hand, if the price falls below 148.35, the sellers could bring the pair down to 148.00. Extended control could break the level, thus negating the upside narrative and potentially testing $147.55.