USD/JPY vs US Treasury 10-year yields (%) daily chart
The key catalyst for the dive lower this week was a more dovish Fed. That also led to a big rally in bonds, with 10-year yields still trading under 4% at 3.95% on the day currently. In turn, that translated to a break lower in USD/JPY below its 200-day moving average (blue line) and that puts sellers in the driver’s seat.
The downside break is being maintained today, even if price action is a little more flattish overall for the dollar heading into European trading.
The gist of it is that if USD/JPY keeps below the 200-day moving average, then sellers are in control and may potentially look towards a push to 140.00 next. The onus is on buyers to try and break back above the key technical level, in order to wrestle back some control.
But after an unnerving rally in bonds over the last six weeks, alongside a more dovish Fed, it’s going to be a tall order for buyers now. The BOJ will be the next key risk event for the pair in the week ahead. I would expect Ueda & co. to maintain the status quo and keep alluding to the spring wage negotiations next year before saying much of anything else though.