USD/JPY grinds higher towards 109.50 as US yields remain the main focus

• USD/JPY keeps grinding higher despite falling equities as the surging US Treasury yields remain the main market focus.
• USD/JPY is approaching key technical levels at 109.47, the 100-period simple moving average on the weekly time frame.

The USD/JPY is trading at around 109.31 up 0.46% on Wednesday as the greenback is underpinned by multi-year highs in the US Treasury yields. 

The USD/JPY broke above Tuesday’s high and is en route towards the 109.46 level which is the 100-period simple moving average on the weekly time frame. In absence of major macroeconomic news, the central theme leading the pair will remain the surge in the US Treasury yields which is boosting demand for the US dollar.

Despite the downtick in equities, the USD/JPY is keeping its gains and pushing higher. The surge in the US Treasury yields is overshadowing the weakness in stocks. The yen is a safe-haven currency and it is usually bought in times of market corrections. However, this time around the surge in yields plays overweigh everything and the USD/JPY keeps rising as equities are falling.  

Following the relentless bull trend in the 10-year Treasury yields benchmark, the US Dollar Index (DXY) which measures the greenback relative to a basket of currencies, broke above the 91.00 key level and is consolidating in the 91.10-91.20 region in Wednesday’ trading. 

Looking ahead on the Japanese macroeconomic calendar, Thursday will see the release of several indicators. The more important one will be the inflation data with the core Tokyo Consumer Price Index (CPI) expected to stay stable at 0.8% in April. The industrial production, unemployment rate and the retail trade data will also be released on the same day. Barring an extraordinary deviation in the numbers the market is still driven by the surge in US yields and the much more important US inflation and Gross Domestic Product data scheduled to be released on Friday. 

USD/JPY daily chart

The trend is bullish. Support is seen at 108.50 psychological level and at 106.50 swing low while resistance is seen at 109.46, 100-period SMA (weekly) and at the 110.00 figure.