FX.co ★ UFCworriers | USD/JPY

Fundamental Analysis The US dollar (USD) is up 0.15% and trading near 160.00 against the Japanese yen (JPY). The USD/JPY currency pair gains as the US dollar rallies on a rise in US Treasury Yields. At press time, the US Dollar Index (DXY), a measure of the greenback's performance against six other currencies, trades higher by 0.2% to around 99.60. 10-year US Treasury Yields have touched a new 19-month high at 4.78%, moving closer to the multi-year peak of 4.81%. The strategists at BNY Markets point out that, although Warsh “did not quite go as far as forward guidance at his Jackson Hole speech,” Warsh “did take things right up to the edge in calling for a rate hike,” which has already put the market “at almost a two-thirds chance of a rate hike at the next FOMC meeting on September 16.” However, after that decision, “it gets much more unclear,” but there are “still at least another two rate hikes expected through the early part of 2027 and more on top of that, though not a full rate hike, totaling around two and a half hikes.” The BNY says that along with the rate repricing, “there has been an important move in the back end of the curve: 'The long end has sold off, reflecting the belief of many (ours included) that a more hawkish stance on the part of the Federal Reserve would actually lower yields through the mechanism of improved credibility.' However, instead, both the 10y and 30y yields 'have moved much higher since Friday,' reinforcing our belief that there are factors besides just inflation expectations and monetary-policy conjecture driving the long end of the curve. We see fiscal considerations and doubts about credibility as the guilty parties.'” The Japanese yen struggles to attract bidders despite market watchers' confidence in an interest rate increase at the upcoming BoJ policy meeting. Technical Analysis On the daily chart, the USD/JPY finds support near 159.90. Therefore, the pair is trying to maintain a slightly positive outlook, trading above the 20-day EMA at 159.59. The price action indicates that buyers still dominate, although the reversal does not seem strong enough to provide sustainable confirmation of a bullish break. The ability to remain above the 20-day EMA will thus play an important role in maintaining the existing upward bias. In terms of momentum, the market is expected to experience a rather conservative recovery. The 14-day RSI is trading near the 51 mark, retracing above the neutral 50 level after bouncing from oversold territory. The 20-day EMA at 159.59 remains the primary support level. Retaining the support area would mean buyers can protect the recovery pattern and keep the focus on resistance levels. Failure to remain above the EMA would indicate a weakening structure, suggesting the recovery attempt is losing strength. On the upside, the bulls' resistance breakout level is the August 28 high at 160.20. Breaking above 160.20 will strengthen the bullish setup, with the possibility of a move toward the July 31 high of 160.88. In summary, USD/JPY continues to have a slightly positive technical bias as long as it remains above 159.59. Nevertheless, with an RSI of 51, there is no strong momentum. Hence, a decisive break above 160.20 becomes necessary to affirm a positive trend.