Daily Market Recap - USDJPY

The US Dollar climbed against the Japanese Yen on Thursday on the back of rising US Treasury yields. The USDJPY is trading up 0.83 percent at the time of writing, one of the larger movers in the forex space.

The yield on the 10-year US treasury bill jumped above 1 percent for the first time since the start of the covid-19 pandemic in March. The spread between the US government bonds and the Japanese government bonds has now widened, helping to boost the appeal of a USDJPY carry trade as the Dollar becomes a more attractive asset.

The news that the Democrats have taken control of the US Senate has increased the expectations on additional stimulus measures, in turn, lifting business optimism. Accordingly, US economic data released today helped bolster the optimism as jobless figures came in below the forecast and the ISM services PMI increased instead of the projected contraction.

From a technical perspective, the momentum behind the USDJPY on the daily chart has broken above into bullish territory today. The pair seems to have its eyes set on the 103.921 resistance level, ultimately hoping to flip the 104 psychologically significant level into short-term support.

(Chart Source: Tradingview 07.01.2021)

However, the outlook remains mixed as should previous patterns repeat themselves, the probability of a sell the rally in the USDJPY is high. The downtrend has been around for some time and renewed stimulus discussions in the US will pressure the buck soon enough. The immediate downside target will be the 20 days MA, and further ahead, the 0.236 Fibonacci retracement level around 103.408.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.