The Dollar/Yen is edging higher early Monday as investors moved into the U.S. Dollar amid a shaky start to stock market trading in Asia and as U.S. stock futures slide lower on interest rate worries. Meanwhile a tightening lockdown in Shanghai stoked concerns about global economic growth and possible recession.
At 04:41 GMT, the USD/JPY is trading 130.963, up 0.417 or +0.32%. On Friday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $71.74, down $0.27 or -0.38%.
Not only is the U.S. Dollar being lifted by safe-haven buying, but an overnight jump in U.S. Treasury yields is also helping to make the greenback a more attractive asset.
The benchmark 10-year U.S. Treasury yield is testing its highest level since 2018 at 3.1464%. This is widening the spread between U.S. Government bond yields and Japanese Government bond yields, pushing the USD/JPY to within a whisker of a fresh 20-year high.
Furthermore, expectations are for the Dollar/Yen to resume its torrid rally over the near-term on the back of sharply higher U.S. rates.
Last Wednesday, the Federal Reserve hiked its benchmark rate 50 basis points and Friday’s strong jobs data reinforced bets on further big hikes.
As of Friday’s close, U.S. futures markets were pricing a 75% chance of a 75 basis point rise at the Fed’s next meeting in June and more than 200 bps of tightening by year’s end.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through 131.249 will signal a resumption of the uptrend. A move through 126.945 will change the main trend to down.
The minor range is 126.945 to 131.249. Its 50% level or pivot is the nearest support. This is followed by additional support levels at 127.360 and 126.267.
Daily Swing Chart Technical Forecast
The direction of the USD/JPY early Monday is likely to be determined by trader reaction to 130.546.
Bullish Scenario
A sustained move over 130.546 will indicate the presence of buyers. The first upside target is 131.249. Taking out this level will signal a resumption of the uptrend. This could trigger an acceleration to the upside although some traders fear an intervention if the volatility gets too high.
Bearish Scenario
A sustained move under 130.546 will signal the presence of sellers. If this move creates enough downside momentum, we could see a test of the pivot at 129.097.
A failure to hold 129.097 will be a sign of weakness, but 128.632 is likely the trigger point for an acceleration to the downside.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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Source: https://finance.yahoo.com/news/usd-jpy-positioned-breakout-over-050405123.html