Testing the 111.00 level amid fiscal year-end flows in Japan, higher US yields, and a bullish technical outlook

  • USD / JPY is preparing for a breakout above 111.00 amid favorable technical setup.
  • Higher Treasury yields and fiscal year-end Japanese flows continue to encourage USD / JPY bulls.
  • The focus is on Biden’s infrastructure spending plans and returns.

USD / JPY’s vertical rise extends for the sixth day in a row on Wednesday, as the bulls hit the highest levels seen since January 2020.

At the time of writing, the USD / JPY pair is slightly back to the 110.65 region after hitting fresh multi-month highs at 110.97 earlier in the day.

The pair’s upward movement could be mainly attributed to the Japanese fiscal year-end sell-off, as companies close their books and repatriation flows are also key.

In addition, the rebound in US Treasury bond and US dollar yields, amid hopes for higher US fiscal spending to fuel the post-pandemic economic recovery, are also helping. the rally in USD / JPY.

The main risk event of the day for the pair remains the speech by US President Joe Biden, while broader market sentiment and end-of-month money flows will likely remain the key drivers.

From a short-term technical perspective, the USD / JPY daily chart paints a bullish picture, with buyers extending the breakout to the upside of a bullish flag pattern.

A confirmed gold cross last week reinforces the bullish technical break, prompting a test of the 111.00 level.

The next resistance for the bulls is seen at the horizontal zone of 111.75 (orange line). Higher up, the 112.26 level (yellow line) could be tested if the pair sustains the breakout above 111.00.

However, with the RSI already in the overbought zone, a corrective pullback cannot be ruled out before the uptrend resumes.

Therefore, the pair could pull back towards the daily lows of 110.27, below which the round level of 110.00 could offer strong support.

USD / JPY daily chart

USDJPY

USD / JPY additional levels

.

You may also like