USD/JPY Daily Forecast – U.S. Dollar Breaks Higher Against Japanese Yen
USD / JPY Video 10/7/20.
Higher yields on US Treasuries support the US dollar
USD / JPY has finally managed to break above the main resistance level at 105.70 and is moving towards 106.00.
The US dollar is losing ground against a broad basket of currencies, but the USD / JPY is ignoring this trend as safe haven demand for yen declines.
The yield on US Treasuries has recently increased for both 10-year and 30-year bonds, making the US dollar more attractive against other safe havens.
With Japan's bonds yielding almost nothing and often falling into the negative yield range, the recent surge in US Treasury bond yields has been a major positive catalyst for USD / JPY.
Forex markets are likely to remain volatile after Donald Trump decides to end negotiations on coronavirus bailout with Democrats. Without a new round of stimulus, traders will likely focus on the upcoming economic reports.
On Thursday, the US will submit reports on initial jobless claims and ongoing jobless claims reports. Initial jobless claims are projected to decrease from 837,000 to 820,000, while continuing jobless claims are expected to decrease from 11.77 million to 11.4 million.
The market will worry about the state of the US labor market if there is no new round of economic activity. If the reports are worse than expected, traders are likely to increase their safe haven asset purchases and boost the US dollar against a broad basket of currencies.
USD / JPY moved above the major resistance at 105.70 and developed additional upside momentum. The next significant resistance level for USD / JPY is at 106.30.
If USDJPY rises above resistance at 106.30, it is moving towards the September high at 106.55. Movement above the resistance at 106.55 will pave the way for the major resistance level at the August highs at 107.00.
On the support side, the previous resistance at 105.70 is likely to serve as the first level of support for USD / JPY. If USD / JPY breaks below this level, the next support will be tested at the 20th EMA around 105.55. Movement below the 50 EMA will push USD / JPY towards the next support at 105.20.
In our economic calendar you will find all economic events of today.
This article was originally published on FX Empire
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