USD/JPY recovers losses as Treasury yields rise

The uptick in the Treasury yields is helping the US dollar regain some poise following Tuesday’s broad based sell-off. 

The Dollar-Yen pair is now trading largely unchanged on the day around 112.09. The spot clocked an intraday low of 111.88 earlier today. 

The 10-year Treasury yield is staging a rebound from the 50-DMA in Asia and that has helped the USD/JPY recover from the low of 111.88 to 112.09. However, further gains look difficult, given the bearish technical set up. 

The focus remains on the Treasury yields and more on the yield curve (difference between the 10-yr yield and the 2-yr yield). A steeper yield curve is positive for the US dollar and vice versa. 

USD/JPY Outlook

Kathy Lien from BK Asset Management says, “Chances are progress on tax reform will be slow with many challenges along the way which opens the door to further dollar weakness. U.S. data continues to miss (the NAHB housing market index dropped to its lowest level 8 months), investors are growing more skeptical of fiscal reform and Treasury yields fell sharply today. As a result, USD/JPY could drop to 111.00-110.50.”

USD/JPY Technical Levels

FXStreet Chief Analyst Valeria Bednarik takes note of the key technical levels on the Dollar-Yen pair. 

• Support levels: 111.60 111.20 110.90
• Resistance levels: 112.30 112.70 113.10