The Dollar/Yen is inching higher on Thursday, essentially mirroring the early movement in U.S. Treasury yields in the overnight session. The Forex pair is also hovering just below a major 50% level at 107.154. This level rejected buyers the previous session.
At 06:01 GMT, the USD/JPY is trading 107.059, up 0.045 or +0.04%.
The dollar hit a seven-month high against the yen on Wednesday as an orderly rise in U.S. Treasury yields lent support ahead of a speech by Federal Reserve Chairman Jerome Powell that may determine the trend for global bond markets and currencies.
A chaotic sell-off in Treasuries from the start of the year on concerns that massive government spending to support the global economy may drive up inflation culminated in 10-year yields rising to a one-year high of 1.6140% last week.
The rapid in rise in Treasury yields also helped widen the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a more attractive investment.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 107.154 will signal a resumption of the uptrend.
The main trend will change to down on a move through 104.923. This is highly unlikely, but there’s always the possibility of a closing price reversal top just to alleviate some of the upside pressure. Any sharp break in Treasury yields will be the catalyst behind the sell-off.
The primary upside target is a long-term retracement zone at 107.154 to 108.230.
The current minor range is 104.923 to 107.154. Its 50% level at 106.039 is the primary downside target. This level will move up as the USD/JPY move higher.
Daily Swing Chart Technical Forecast
The direction of the USD/JPY on Thursday will be determined by trader reaction to the major 50% level at 107.154.
A sustained move over 107.154 will indicate the buying is getting stronger. The first upside target is the July 20 top at 107.530. This is followed by the July 7 main top at 107.790.
A sustained move under 107.154 will signal the return of sellers. If they can generate any meaningful downside pressure then look for a potential near-term break into its 50% target at 106.039.