The USD/JPY erased daily losses on Monday during the American session and climbed to 136.80, hitting a daily high on the back of a weaker Japanese Yen hit by higher yields.
Government bond yields are rising sharply. The US 10-year is at 3.58%, at the highest in almost a week. The German 10-year reference stands at 2.21%, the highest since early November.
In Wall Street, equity indices failed to hold in positive ground. The Dow Jones is falling by 0.05% and the Nasdaq by almost 1%.
After a busy week, in terms of economic data and events, that included the FOMC meeting, the US calendar is light for the days ahead. Market participant will likely continue to digest what the Federal Reserve will do next and the latest round of economic data, with concerns about the global economic outlook.
On Tuesday, the Bank of Japan will announce its monetary policy decision. No change is expected. “Despite the recent chatter about a potential policy review next year, we believe it is way too early for the BOJ to commit to one now. Indeed, we believe such an announcement is unlikely during the remainder of Governor Kuroda’s term, which ends in April,” mentioned analysts at Brown Brother Harriman.
The pair is moving sideways in the short term, between two key areas. On the upside, the 138.00 is the critical resistance. A daily close above would open the doors to more gains.
On the flip side around 135.50 there are many horizontal resistance and also the 200-day Simple Moving Average. A break lower should point to a test of the December lows and a resumption of the rally of the JPY from above 150.00.