USD/JPY Bulls Get Lifeline from Bond Bloodbath
The recent surge in US Treasury yields has been a mixed bag for USD/JPY traders. On one hand, rising bond yields are typically bullish for the dollar against the yen. However, this time around, the pair has fallen sharply over the past couple of weeks despite the supportive rates backdrop.
US-Japan yield spreads have widened at an unusually rapid pace, with the 2, 5, 10, and 30-year tenors seeing a widening spread that sits at the 98.5th percentile going back to the late 1990s. This has historically been a bullish catalyst for USD/JPY, but so far, it hasn't provided the expected support.
The recent price action on the charts suggests a reversal is in play, with a bullish engulfing candle forming after a pronounced leg lower. The level overhead to watch is 154.45, which has repeatedly acted as both support and resistance over the course of this year.