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  • USD/JPY recovers losses, possibly due to an uptick in the treasury yields.
  • The rise in Treasury yields indicates a relief rally could be in the offing for the risk assets.

The bid tone around the Japanese Yen seems to have weakened, possibly due to a rise in the US treasury yields.

As of writing, the USD/JPY pair is trading at 108.66, having hit a session low of 108.35 earlier today. Meanwhile, the 10-year treasury yield is trading 2.82 basis points – up 7 basis points from the six-week low of 2.75 percent seen yesterday.

The uptick in the 10-year treasury yield (drop in Treasury prices) and the drop in the Japanese Yen could be an indication the risk assets may regain some poise today.

Focus on US data

The USD/JPY pair could move back above 109.00 if the US first-quarter preliminary GDP reading betters estimates. The yields and the US dollar could also take cues from the US ADP employment figure.

Note, the probability of the June Fed rate hike has dropped below 80 percent from 95 percent seen two weeks ago. History shows Fed tends to raise rates as long as the probability holds above 70 percent. So, June rate hike is still on the table. However, a big miss on the US GDP figure and/or further worsening of the political situation in Italy could push the probability of a June rate hike below 70.00. In such a case, the US dollar will likely take a beating.

USD/JPY Technical Levels

The resistance is seen at 108.78 (session high), 109.07 (5-day MA), and 109.89 (10-day MA). Meanwhile, support is located at 108.28 (50-day MA), 108.16 (100-day MA), and 107.78 (April 13 high).