USD/JPY Intermarket 10-yr T-yield remains near one-month lows, is it a technical correction?

USD/JPY found takers at 111.00 in early Asian session today and was last seen chipping away at 111.38 (23.6% fib retracement of the drop from 115.504 to 110.107).

The pair hit a low of 110.11 on Monday on the back of a broad based risk aversion and the resulting drop in the 10-year treasury yield to a one-month low of 2.374%.

Technical correction in the Dollar-Yen pair

The spot has staged a recovery from the low of 110.11 to a high of 111.42 (today’s Asian session high), largely on the back of the oversold technical conditions. We saw a bullish price-RSI divergence on the 4-hour chart earlier this week. Meanwhile, the hourly RSI was oversold as well.

More importantly, the 10-year yield has hardly had any notable recovery and was last seen trading around 2.39%. Moreover, the yields remain depressed despite hawkish comments from Fed’s Rosengren (who called for four rate hikes this year).

To conclude, the technical recovery risks falling apart if the yields do not recover in tandem.