USD/JPY spent the early part of May hovering near 110 but lacking the catalyst to make a convincing break higher and somewhat out of the blue, the closely-watched 10 year Treasury note punched through resistance to reach yield highs since mid-2011, explains Sean Callow, Research Analyst at Westpac.
“It is too soon to tell if Japanese insurers will increase US$ bond holdings but shorter term, the upswing in US yields certainly does no harm to USD/JPY. The pair is probing above the 200 day moving average (110.19), admittedly without great momentum.”
“Risk aversion doesn’t seem to be a headwind for USD/JPY near term, with VIX low and no wobbles on North Korea’s cancellation of the meeting with the South and anger with some US commentary. Spec positioning is about neutral.”
“If yields continue to support DXY, USD/JPY should be able to make modest further gains in the week ahead.”