March 23, 2023

USD/JPY Uptrend Continues, but Volatility Persists: Analysis & Outlook

USD/JPY Upward Trend Continues, but Volatility Persists

The USD/JPY has been on an upward trend since 2021, with gains accelerating last year. As a result, the pair briefly hit the 150.00 mark – the best level seen since the early 90s. However, this rise was followed by a massive correction, taking the pair below the 130 mark in mid-January.

Despite the sharp correction earlier this year, the bulls are reasserting themselves in the past few weeks. As a result, the dollar has resumed its rise against the yen, bringing the pair back above the 130 mark.

Despite the recent bullish sentiment, volatility remains high, and uncertainty looms over the currency pair. Therefore, the yen still holds appeal as a safe-haven currency, especially amidst the ongoing geopolitical tensions.

Rising US Treasury Yields Could Sting

The recent rally in the USD/JPY pair may have a sting in its tail, especially if US Treasury yields continue to rise. Yields have been upward in the past month, driven by the Federal Reserve’s hawkish stance amidst hotter-than-expected US data, including the Consumer Price Index (CPI). As a result, the US 10-year yield briefly recaptured the 4.0% level before dropping, but this uptick is still the highest seen since November 2022.

Inflationary pressures drive the increase in US Treasury yields as manufacturers reveal significant price increases paid for goods. However, it has led to a negative inflation outlook, fueling investor concerns about rising inflation and its potential impact on the US economy.

BoJ’s Dovish Stance Keeping Yields Subdued

In contrast, the Bank of Japan (BoJ) has kept its dovish stance, subduing the country’s yields. According to incoming governor Kazuo Ueda, given the economic circumstances, there is a better time to stop the current stance.

However, this could continue to cause trouble for the yen, as rising US Treasury yields make the dollar more attractive to investors. From a fundamental perspective, the US dollar appears more constructive than the yen. This dynamic is expected to continue as long as traders price in a higher Fed rate and longer monetary tightening cycles.

Technical Analysis: USD/JPY Approaches Key Resistance

Regarding technical analysis, the USD/JPY pair is currently hovering near 137.30, the 38.2% Fibonacci retracement of the January 2023 correction. This level also converges near the 200-day moving average, making it a key resistance level for the pair.

If the pair manages to break through this barrier, the bulls could lead the charge to the psychological price level of 138.00, followed by 140.00. However, if sellers regain control and drive the pair lower, the initial support at 134.65 will hold the pair up. Below this level, the next support is at 132.85.


Investors are closely watching economic data and policy shifts from the US and Japan, which could significantly impact the USD/JPY pair. In addition, the Federal Reserve’s plans for raising its rates to new highs and the Bank of Japan’s monetary policy decisions will likely influence investor sentiment and drive volatility in the coming months.

Overall, the USD/JPY continues to offer opportunities for investors, but caution is advised amidst the high volatility and uncertainty. Keeping a watchful eye on economic data and policy shifts can help investors make informed decisions and capitalize on the potential upside while managing the associated risks.

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