BOJ governor Ueda's remarks were a driving factor for price action on Tuesday but the rest of it has been dictated by movements in the bond market. And that hasn't been too helpful for USD/JPY direction this week. Treasury yields have also chopped around and the action yesterday was a good example of that.
Yields were initially lower but recovered strongly in US trading with 10-year yields rising to a high of 4.19%. It is now down 2 bps to 4.158% but overall, still keeping above the 200-day moving average of 4.10%. I would say that remains the key line in the sand for the bond market.
In turn, USD/JPY has seen back and forth action but is keeping above its own 100-day moving average (red line) at the balance.
The key technical level is seen at 147.51 and as the upside momentum to start the new year hinges on price staying above that. The near-term picture tells a more complex story this week though. Buyers and sellers are battling it out with price action now sitting in between key technical levels.
The 100-hour moving average is seen at 147.93 while the 200-hour moving average is seen at 147.46. The spot price is sitting in between that, highlighting a more neutral near-term bias currently.
If anything, the more up and down but sideways action in USD/JPY this week is a reflection of the moves in the bond market as well.
I would argue that the technicals are now the best guide in deciphering what may come next for both Treasury yields and USD/JPY, as defined by the levels above. But if there is any takeaway, it is that USD/JPY continues to be tied closely to the bond market for now.
