USD/JPY Near 156.50 Resistance, Drops 0.06%

USD/JPY Near 156.50 Resistance, Drops 0.06%

Key Points

  • USD/JPY pair trades at 156.19, below key resistance at 156.50, with a minor -0.06% change.
  • Upward trend with waning momentum; key resistance at 156.76 and RSI in bullish territory but decreasing.

The USD/JPY pair trades at 156.19, hovering below a key resistance level of 156.50. This minor shift, marked by a -0.06% change, reflects broader market dynamics, particularly the negative movement in the US 10-year Treasury yield, which has decreased by 3.5 basis points.

Technical Outlook: USD/JPY Momentum at Cycle High 156.76

From a technical perspective, the USD/JPY pair exhibits an upward bias in its overall trend. However, momentum appears to be waning. The latest cycle high of 156.76, which aligns with the high observed on May 14, suggests a significant resistance point. The Relative Strength Index (RSI) currently resides in bullish territory, signalling that buying pressure is present but decreasing. The key level to watch is the RSI midline at 50; a drop below this level could indicate potential losses, altering the current bullish outlook.

Resistance Levels: USD/JPY Eyes 157.98, YTD High 160.32

In a bullish scenario, the USD/JPY pair faces several resistance levels that must be surpassed for further gains. The first significant resistance stands at the latest cycle high of 156.76. Beyond this, 157.00 serves as another critical barrier. Should the pair break through these levels, the next target would be 157.98, which must be overcome before considering a retest of the year-to-date (YTD) high of 160.32. Achieving these levels would require renewed momentum and sustained buying pressure, potentially driven by positive shifts in broader economic indicators or an increase in the US Treasury yields.

Support Levels: USD/JPY to Test 155.00 in Bearish Trend

Conversely, a bearish scenario would see the USD/JPY pair declining towards key support levels. The first support level lies at 156.00. If this level fails to hold, the pair might find further support at the Senkou Span A level of 155.61, followed by the Kijun Sen level of 155.18. Additional support can be found at 155.00, a critical threshold for bearish traders. These support levels could provide temporary relief; however, a breach could lead to a more significant downturn, especially if economic conditions or US Treasury yields continue to trend negatively.

Impact of 3.5 bps Drop in US 10-Year Treasury Yield

The US 10-year Treasury yield plays a crucial role in the valuation of the USD/JPY pair. Given the positive correlation, a decline in the yield often exerts downward pressure on the pair. The recent decrease in the yield by 3.5 basis points has coincided with the slight drop in the USD/JPY price. This relationship underscores the importance of monitoring Treasury yield movements when analysing the future direction of the USD/JPY pair.