USD/JPY surges toward 150.00, boosted by elevated US Treasury yields

• USD/JPY rallies more than  0.80%, driven by a spike in US 10-year Treasury bond yields.
• US economic data shows mixed signals with lower-than-expected jobless claims and a significant drop in Durable Goods Orders.
• Japan’s revised economic outlook and continued dovish Bank of Japan stance contrasts with US inflation expectations to underpin the USD/JPY.

The USD/JPY rebounds from daily lows of 148.01 and rallies more than 0.81% boosted by a jump in the US 10-year Treasury bond yield. At the time of writing, the major exchanges hands at 149.54 and tests a key technical resistance level eyeing the 150.00 figure.

The pair rebounds sharply, fueled by US bond yields and economic indicators, despite mixed consumer sentiment

Key US economic data was revealed today, beginning with the US Initial Jobless Claims for the last week rising less than expected, coming at 209K, below forecasts of 225K, and two weeks ago 233K. At the same time, Durable Goods Orders plunged -5.4% in October, below an expected contraction of -3.1%. Market participants ignored the data, though consumer sentiment moved the needle.

In November, the University of Michigan (UoM) consumer sentiment rose to 61.3, above estimates of 60.5, but missed the prior reading. American households’ inflation expectations, climbed for the one-year outlook, reaching 4.5% compared to the previous reading of 4.4%, and for a five-year outlook, prices are projected to rise to 3.2%.

The US Dollar Index (DXY), which tracks the performance of six currencies vs. the Greenback, rose sharply by 0.49% and sits at 104.10, underpinned by higher US Treasury bond yields, as a reaction to the UoM inflation expectations poll.

On the Japanese front, Japanese authorities downward revised the economic outlook for the first time in 10 months. The revision came after Japan printed a contraction in the third quarter as demand waned. Therefore, the Bank of Japan’s (BoJ) dovish stance would likely continue well into 2024, despite expressions that foresee the BoJ would end its negative interest rate policy in April of next year, according to former BoJ executive Kazuo Momma.

USD/JPY Price Analysis: Technical outlook

From a technical perspective, the USD/JPY shifted to a neutral-upward bias as price action witnessed a break of the Ichimoku Cloud (Kumo), opening the door for further gains. However, buyers must reclaim the Tenkan-Sen at 149.53 so they can challenge the 150.00 figure mark. On the other hand, failure to crack the confluence of the Tenkan and Kijun-Sen would pave the way for a downward correction, toward 149.00, with sellers eyeing a drop inside the Kumo to test November’s 21 low of 147.15.