USD/JPY knocks on the door of the key resistance level near 114.50
Treasury yields are continuing to move higher with 10-year yields now up 3.0 bps to 3.211% on the day. And that will continue to fuel bids in USD/JPY even more than it already has during the last month or so. For the pair, it's been mostly a yields story for September and that won't change with yields threatening to break out.
There are some light hints of risk off in Asian trading and that is helping somewhat to keep the yen bid but make no mistake, it's all about yields at the end of the day. The only supportive reason I can point to for the yen to stay bid against the dollar is if global equities threaten to collapse in the wake of higher yields - like what we saw in late January this year.
Otherwise, expect USD/JPY to stay bid in the days/weeks ahead. Right now, the pair is testing a key resistance level near 114.50 where previous upside moves in 2017 stalled three times. There is further resistance at around 115.00 followed by the 115.50-60 region but beyond that, I don't see any reason why the pair cannot move higher as long as yields continue to provide buyers with the support they need.
There isn't going to be much on the agenda today in terms of key data so the next risk event for dollar and yields will be tomorrow's US jobs report. Watch out for the resistance levels above for USD/JPY. If buyers are able to crack higher above them, things can turn ugly real fast.
