The USD/JPY has reached new highs, driven by surging US Treasury yields, while the Nikkei 225 is showing signs of testing key resistance levels. As traders await pivotal decisions from the Federal Reserve and the Bank of Japan later this week, bullish momentum is building for both the currency pair and Japanese equities.
Key Highlights:
- USD/JPY Rises on Higher US Yields: The yen continues to weaken, pushing USD/JPY to fresh highs.
- Nikkei 225 Approaches Resistance: Equity traders eye a breakout in futures.
- Upcoming Central Bank Decisions: The Fed and BoJ are set to announce rate decisions midweek.
USD/JPY Surges Amid Rising Yields
The USD/JPY gained momentum as US Treasury yields climbed, reaching weekly highs. A sharp rise in benchmark 10-year yields, which spiked by 24.6 basis points last week, played a key role in the pair’s upward trajectory. Technical indicators like RSI (14) and MACD also support the bullish sentiment, suggesting further upside potential.
The pair broke through the 153.38 resistance level last Friday, clearing both the 50-day and 200-day moving averages earlier in the week. With bullish momentum intact, traders may find opportunities to buy dips or enter on bullish breaks. Potential targets on the upside include 155.89 and 156.75.
However, if the price reverses below 153.38, further downside scenarios seem less appealing due to nearby support levels, including the 200-day moving average.
Nikkei 225 Futures Poised for Breakout
The yen’s weakness has also fueled optimism in the Nikkei 225 futures market, where traders are watching for a bullish breakout. Futures have been confined to a range, with support at 38000 and resistance around 40000. However, recent price action has brought futures closer to the upper boundary of the range, with support strengthening near 39000.
Momentum indicators, including RSI (14) and MACD, suggest increasing bullish potential. If the price holds above the minor uptrend at 39450, traders could look to establish long positions with a stop just below for risk management. The 40000 level, which has repeatedly attracted sellers, remains an initial target.
Alternatively, a failure to hold the uptrend could signal a return to range trading, with 39000 acting as the next level of support.
Technical Overview: USD/JPY and Nikkei 225
- USD/JPY: Strong upward momentum as yields rise, with resistance at 155.89 and 156.75. Buy setups preferred above 153.38, with cautious positioning for potential pullbacks.
- Nikkei 225: A bullish breakout could occur above 39450, targeting 40000. If the uptrend falters, traders may return to the established range.
Key Events to Watch
The Federal Reserve and the Bank of Japan will deliver their respective interest rate decisions on Wednesday and Thursday. These announcements will be critical in shaping the near-term outlook for both USD/JPY and Japanese equities.
