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The Dollar/Yen is trading higher on Friday after bypassing the symbolic level of 150 Yen the previous session for the first time in 32 years. The move is being fueled by rising Treasury yields that reached multi-year highs once again. Although the Forex pair is pressing higher, traders remained on high alert for any signs of an intervention from Japanese authorities.
At 07:11, the USD/JPY is trading 150.935, up 0.787 or +0.52%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $62.18, down $0.18 or -0.29%.
US 10-Year Treasury Climbs to Fresh 14-Year High
Early Friday, the USD/JPY nudged higher after the yield on the 10-year Treasury note hit a fresh 14-year high on Friday, while the 2-year note traded in territory last seen in 2007 as signs of a recession worried markets.
The 10-year Treasury yield was last at 4.2843%, after rising by close to six basis points. This marked the highest level the benchmark note was traded at since 2008. The yield on the 2-year Treasury climbed to a new 15-year high of 4.639% on Friday. It was last almost flat at 4.616%.
Japanese Officials Still Threatening Intervention
On Thursday, Reuters reported Japanese Finance Minister Shunichi Suzuki said the government will take “appropriate steps against excess volatility.”
“Recent rapid and one-sided Yen declines are undesirable. We absolutely cannot tolerate excessively volatile moves driven by speculative trading,” he said.
Short-Term Outlook
There have been a lot of potentially explosive threats the past two weeks from Japanese officials, but buyers aren’t backing off. Sure there may be some speculators in the mix, riding the USD/JPY higher, but the majority of longs have probably based their purchases on the divergence in monetary policy between the Bank of Japan and the U.S. Federal Reserve.
With investors preferring U.S. Dollars over Japanese Yen due to the hawkish Fed and the ultra-dovish Bank of Japan, experts point out that there is no currency manipulation that would destabilize the Yen. This is probably making it hard for Japan policymakers to justify an intervention.
Daily Swing Chart Technical Forecast
The main trend is up according to the daily swing chart. A trade through the intraday high at 150.984 will signal a resumption of the uptrend. A move through 140.353 will change the main trend to down. This is highly unlikely, but due to the prolonged move up in terms of price and time, the USD/JPY is inside the window of time for a closing price reversal top.
Trader reaction to 150.148 will likely determine the direction of the USD/JPY on Friday.
Bullish Scenario
A sustained move over 150.148 will indicate the presence of buyers. Taking out 150.984 will indicate the buying is getting stronger. This could fuel an acceleration to the upside with no target in place.
Bearish Scenario
A sustained move under 150.148 will signal the presence of sellers. Taking out 149.555 will indicate the selling pressure is getting stronger.
Side Notes
A close under 150.148 will form a closing price reversal top. If confirmed on Monday, this could trigger the start of a 2 to 3 day correction and a steep break into the nearest support at 147.248.
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