Extend rally to five year highs, close at 116.00

  • USD / JPY clears November 2021 highs in an attempt to recover 116.00.
  • US Treasury yields consolidate near multi-week highs on Fed rate hike expectations.
  • The ascending triangular breakout on the 1D chart calls for more upside.

USD / JPY sits at its highest level since January 2017, quickly approaching the 116.00 mark as the US dollar sees renewed buying interest across the board for Asian trading.

The major continues to build on the recent strength in U.S. Treasury yields across the curve, as investors forecast a Fed rate hike in March as the surge in Omicron covid cases around the world also maintains the high market returns.

It should be noted that Treasury yields have risen throughout 2021 due to concerns about the coronavirus pandemic and inflation. Benchmark 10-year rates jumped above 1.60%, rising as much as 13 basis points on the day.

Looking ahead, Fed-induced sentiment and covid updates will continue to impact yields, in turn affecting principal. Also, it should be noted that the US ISM Manufacturing PMI for USD / JPY trading in the coming day.

USD / JPY per day graphic shows price broke through ascending triangle resistance at 115.55, triggering further advance to 115.81, multi-year highs. A daily close above this resistance is needed to confirm the breakout of the triangle, opening the door for a rally towards 116.00.

The next critical bullish target is at the psychological level of 116.50.

USD / JPY: Daily chart

However, the 14-day Relative Strength Index (RSI) leans into the region of overbought, which warrants the bulls to be cautious.

Any retracement will challenge the daily lows of 115.29 before hitting the support area of ​​115.00. Monday’s low of 114.95 will be next on sellers’ radars.

USD / JPY: additional levels to consider

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