USDJPY Range-Bound as Falling Treasury Yields Cost the Dollar

Summary:

USDJPY has stuck in a week-long range, with the US treasury yield curve inverted. Could FOMC minutes and Japan PMI change things?

USDJPY remains in its week-long range, as the market waits for high-impact news. The pair oscillated around the 150.00 mark, with the dollar losing 0.10% on Tuesday and recovering 0.07% of the losses as of 10.00 am GMT on Wednesday. Furthermore, USDJPY remains on a downtrend, stretching back six days. For now, the speculated intervention by the BoJ seems unforthcoming, and traders have turned their attention to the scheduled release of the FOMC meeting minutes.

Falling US Treasury yields and the yen’s prospects

The US dollar has paid the price of falling Treasury yields, with its underperformance reflected in the DXY index’s downward-sloping gradient. Yields on the 10-year bonds have fallen by 1 basis point to 4.269%, while those of 5-year bonds have gone down by the same margin to stand at 4.238% at the time of writing.

Notably, the yield curves have inverted as of this writing, indicating that investors could have moved their money to long-term bonds ahead of the FOMC minutes release. It also indicates risk aversion by investors, which could exert downward pressure on the dollar if the trend continues after the FOMC minutes release.

Meanwhile, Japan will release its services and manufacturing PMIs for February. A rise in the readings will help prop up the yen, as it will indicate improving economic output in the nation. Japan reported a surprise GDP contraction in the fourth quarter of 2023, consequently slipping below Germany to become the world’s fourth-largest economy. A decline in the PMI readings would exacerbate the FUD sentiment around the yen.

Technical analysis

USDJPY is pivoting around the 150.15 mark, and the market will likely be choppy if the resistance remains at that level. If the sellers take control, they are likely to test the support at the 149.70 mark. A break below that support could support further declines to 149.50. The bulls are likely to attempt to drive the pair up beyond the pivot level to test the 150.30 resistance. A successful breach past that level will bring 150.45 within reach.