USD/JPY Bounces on Higher Yields, Markets Eye US CPI Data
The USD/JPY currency pair has rebounded due to higher US Treasury yields following the release of the US PPI. This increase in yields has lifted the broader USD, contributing to the rebound in the pair. Meanwhile, rising oil prices have added to inflation concerns and weakened Japan's terms of trade.
Markets are now awaiting the upcoming release of the US CPI data, which could drive yields higher if there is an upside surprise, particularly in core inflation. However, a softer reading could reverse recent rate repricing and support a JPY recovery.
The near-term bias remains tied to the US rates channel, with expectations of further BOJ normalization limiting sustained upside in the pair. Technical indicators show that bearish momentum may be fading, with tentative bullish divergence forming on MACD and RSI charts.
Key resistance levels for the USD/JPY are at 155, aligned with the 23.6% Fibonacci retracement of the 2026 low-to-high move, and at 156.70, the 38.2% level. Support is outlined at 153 and 152.20, the 2026 low.
Volatility drivers such as US Treasury yields and global oil prices are expected to continue affecting the Japanese Yen, with traders advised to prepare for heightened volatility in the coming weeks. Derivative traders may consider using short-term option straddles ahead of the upcoming US CPI release.