USDJPY Slides As the Market Becomes Ignores Rising Treasury Yields

Summary:
• US treasuries have steadied above 4.300%, but traders seem to be handling USDJPY with safety gloves heading into the weekend.

USDJPY faces rejection at the 150.80 mark, and has lost some of the gains registered during Thursday’s session. The pair traded at 150.430, down 0.07% at the time of writing, after touching a weekly high of 150.770 earlier on Friday. The BoJ’s verbal intervention seems to have staved off aggressive advances by the US dollar heading into the weekend. Notably, the pair seems to have ignored the rising US Treasury yields.

Two FOMC members, Fed Governors Lisa Cook and Christopher Waller, stated on Thursday that they were in favour of prioritizing lowering inflation sustainably to the 2% level, even if that means keeping the 5.25%-5.50% interest rates for longer. Yields on 5 and 10-year US treasuries spiked following these comments, stabilizing above 4.300%, near November 2023 highs. However, the market seems to have moved past this.

Japan’s markets are closed on Friday for The Emperor’s Birthday, but the absence of high-impact data from the US means the yen could keep the dollar in red through the weekend. Japan’s trade balance improved significantly in January YoY, as exports increased by 11.9%, beating the projected 9.5%. Meanwhile, imports fell by 9.6% during the same period. These figures seem to have built enough momentum to help the yen absorb the shocks from lower-than expected PMI data.

The odds of the USDJPY pair heading to 151.00 are low heading into the weekend. However, that could change next week when Japan releases its inflation data. Traders will also be keen to avoid placing big bets on the pair in the intervening period as the BoJ keeps everyone guessing its next move.

Technical analysis

The RSI signal suggests a downward tendency, while the USDJPY pivot is located at 150.31. With the sellers leading the way, the pair will try to break below the 150.14 support level. If a breach is successful, the support is expected to move to 149.92. On the other hand, if buyers take charge, the pair may stay above 150.31, facing initial resistance at 150.53. If the rate surpasses that level, the bulls will aim to test 150.79.