- Summary:
- USDJPY is on a three-day winning streak and rising US treasury yields have added tailwinds to the currency pair.
USDJPY rose sharply on Wednesday as rising yields on US treasury bonds added to the currency pair’s upward momentum. The pair was up by 1.2%, the biggest daily gain since mid-December 2024, trading at 154.35 at the time of writing. In addition, it was on course to register the third successive daily gain, underlining a strong bullish sentiment.
Yields on benchmark 10-year US treasury bonds have been on the rise this week and were up by 11 basis points to 4.653% at the time of writing. This in contrast to Japan’s bonds, were at 1.334%, the highest level in 14 years. Nonetheless, the widening differentials between them has added propulsion to the USDJPY pair.
Also, the US dollar got additional support from consumer inflation data released on Wednesday. The nation’s January Consumer Price Index (CPI) rose by 3% YoY, beating the forecast figure of 2.9%. The monthly rate was at 0.5% exceeding the midian forecast 0.3%.
Core CPI rate (excluding food and energy prices) followed a similar trajectory, rising to 0.4% from December’s 0.2% and exceeding the forecast rate of 0.3%. The annualized rate was at 3.3%, similarly beating the analysts’ forecast figure of 3.1%. Federal Reserve Chairman, Jerome Powell stated on Tuesday that the Fed is under no pressure to reduce interest rates as the jobs market and the economy looks stable. That favours USDJPY to maintain a strong standing.
USDJPY Prediction
USDJPY pivots at 154.30 and the momentum indicator signals a likely continuation of the upside. The first hurdle will likely be at 155.00, but an extended control by the buyers could break above that level and test 155.55.
Alternatively, the sellers will be favoured to take control if action breaks below 154.30. With that, the currency pair could find the first support at 153.95. A break below that level will invalidate the upside narrative and potentially clear the path to test 153.40.
