USD/JPY bears risk losing grip as rising yields and trade optimism threaten bearish technical setup
USD/JPY bears risk losing grip as rising yields and trade optimism threaten bearish technical setup
Technical Analysis:
USD/JPY has seen bearish momentum fade significantly early in June, raising risks for speculators positioned short, as the pair decisively reclaimed key technical levels on Tuesday. The pair advanced firmly above its critical 200-hour moving average at 143.65 and moved into the Ichimoku daily cloud, signaling an erosion of bearish sentiment. This shift coincided with a marked rise in U.S. Treasury yields and buoyant equity markets, boosted notably by stronger-than-expected JOLTS data and improved market sentiment linked to potential U.S.-Japan trade progress. Early monthly hedging flows further exacerbated the yen’s retreat, reinforcing near-term bullish pressure in USD/JPY.
From a technical standpoint, continuation beyond immediate resistance at 144.18, the June 2 high, would disrupt the previously dominant bearish pattern characterized by a sequence of lower highs. Should the pair succeed in breaking decisively above this level, speculative shorts could face significant position unwinding, triggering a short-covering rally. Key overhead resistance points to monitor are the conversion line at 144.20 and the strategically important 21-day moving average at 144.65. Beyond these levels, a successful bullish break could target the daily Ichimoku cloud top at approximately 146.24, dramatically shifting the technical landscape in favor of the bulls.
The near-term outlook for USD/JPY now hinges on two critical catalysts. Firstly, the ongoing U.S.-Japan trade negotiations present upside risk; if a preliminary agreement materializes ahead of the G7 summit, markets may anticipate increased U.S.-bound capital flows, propelling USD/JPY higher. Secondly, U.S. employment data remains pivotal. Robust jobless claims figures on Thursday and a strong non-farm payroll report Friday could sustain Treasury yields’ ascent, further boosting USD/JPY toward critical resistance. Conversely, should sentiment deteriorate or employment data weaken markedly, a fall below the key psychological level at 142.00 would restore bearish momentum, potentially targeting recent lows near 141.97 (April 29 low) and 142.11 (May low).