- The dollar is gaining momentum, given the surge in Treasury bond yields.
- USD/JPY rises for the third day in a row.
USD/JPY is rising again on Tuesday and testing daily highs just shy of 123.00. The main support for the pair comes from the side of a rise in Treasury bond yields.
After finding support at 122.35, USD/JPY bounced back and gained momentum after breaking above 122.80. The break of 123.00 is expected to provide more momentum to the dollar. The next resistances of relevance can be located at 123.25 and 123.80.
Technically, the bullish tone is expected to hold firm as long as it continues above 122.35/40, a horizontal level and where the moving average of 20 and 55 in four hours is passing. A firm break below would expose last week’s low at 121.20/25.
Yields and the dollar
The greenback falls against the currencies linked to commodities, but remains firm against the yen, the euro and the pound. The rise in yields may be the explanation. The 10-year rate yields 2.47%, the highest since March 29, and the 30-year rate 2.53%, the highest since Friday.
The bonds marked minimums in the last hour, giving more strength to the dollar. USD/JPY continues to target 123.00. Caution in equity markets may be limiting yen weakness.
Looking ahead to the next few hours, what happens in the stock markets and in the bond market is expected to be key for the USD/JPY. With regard to data, the foreign trade report for February, the S&P Global services index for March (ex PMI Markit) and the ISM for the services sector will be published in the US. FOMC Governor Lael Braindard and New York Fed President John Williams will speak.
Technical levels
Source: Fx Street
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