The yen showed weakness as US Treasury yields declined, while the euro faced challenges tied to French fiscal concerns. The US 10-year yield saw a dramatic intraday reversal of 13 basis points, dropping from 5.354% to 5.223%. This move, influenced by remarks from President Donald Trump about delaying military action against Iran, led to a drop in crude futures and Treasury yields, which often correlate with the US dollar's strength.
The USD/JPY pair broke its uptrend from mid-September, hinting at a potential broader trend change. However, the euro has yet to follow suit, remaining below downtrend resistance. The relationship between the euro and yen against the US dollar has weakened due to renewed worries about France's fiscal outlook, which has driven up French bond yields relative to German bonds to levels not seen since 2011.
A reversal in French long-end yields could provide the catalyst needed for EUR/USD to break its downtrend. Over the past five and ten sessions, EUR/USD has shown a strong inverse relationship with French government bond yields, particularly at the longer end of the curve. This correlation suggests that a decline in French yields could help EUR/USD break resistance levels around 1.1220, with potential targets at 1.1275, 1.1285, and 1.1312.
The USD/JPY pair broke through triangle support, with the overnight low reaching 157.52. Key support levels to watch include 157.00 and 156.40, while resistance levels are at 158.45 and 159.00. For EUR/USD, the immediate resistance is at 1.1220, with support levels at 1.1173 and 1.1162. The oscillators suggest a mixed outlook, with RSI and MACD delivering cautionary signals rather than clear directional biases.