Yen falls to 10-month low

The Japanese yen has started the week with considerable losses. Currently, USD/JPY is trading at 108.82, up 0.51% on the day.

Dollar pushes yen close to 109

The yen’s woes continue, as the US dollar continues to beat up on the Japanese currency. USD/JPY has jumped 5.6% since January 1 and is pressing on the 109 line, which has held since June 2020. The catalyst behind the recent strength of the US dollar has been the recent rise in US Treasury yields. The 10-year bond climbed to 1.60% earlier on Monday, while 30-year bonds rose to 2.31%. The yen is particularly sensitive to rate differentials between the US and Japan, so the increases in US yields are putting strong pressure on the Japanese currency.

The higher US yields were in response to the Senate passing a massive 1.9 trillion dollar stimulus package on Saturday. The bill now returns to the House for some amendments, and will likely to be signed into law by President Biden by March 14.

Although the dollar’s strength is largely due to the increase in US yields, fundamental releases should not be overlooked. A surprisingly strong US Nonfarm Payrolls last week has provided the US dollar with further upward momentum. The gain of 379 thousand easily beat the forecast of 197 thousand, and was the highest reading since October 2020.

Later on Monday, Japan releases a data dump. Consumer spending and wage growth are both expected to show contraction (23:30 GMT). Japan’s second-estimate GDP is expected to show growth of 3.0%, confirming the initial estimate (23:50 GMT).

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USD/JPY Technical Analysis

• USD/JPY broke above resistance at 108.16 on Friday. The next resistance line is at 109.64, followed by resistance at 110.07
• There is support at 106.96, followed by a support line at 105.53
• There may be an opportunity for buy-on dips as low as 107.50

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