USD/JPY stays supported by US yields – Danske Bank

Senior Analyst at Danske Bank Morten Helt assessed the prospects for the pair in light of the recent performance of US yields.

Key Quotes

“USD/JPY remains supported by rising 10Y US yields and the combination of a neutral speculative JPY positioning and higher US 10Y yields could be a supporting factor for USD/JPY near term (as long as US interest rates volatility does not increase)”.

“However, our fixed income strategists do not expect a strong sell-off in fixed income markets given the business cycle outlook and still dovish central banks, and short-term technical indicators, such as RSI, indicate that USD/JPY is overbought, suggesting that the rally in USD/JPY might lose momentum”.

“The break of 108 on 23 April most likely has widened the trading range to 105-110: However, it would in our view, require a substantial dovish shift in the BoJ’s rhetoric on Friday (not our call) for USD/JPY to settle above 110”.