The potential for a swift breakdown in USD/JPY is growing after Treasury notes fell below key support at 1.78%.
Yield differentials traditionally play a key role in USD/JPY but that relationship broke down early this year as on intervention fears and as speculative money began piling into yen shorts. Those trades are now nearing breaking points and the fall in yields may push them over the edge.
JPMorgan revised its 10-year yield forecast today, saying we could see 1.50%.
A move back to the prior paradigm would equate with USD/JPY at 77.50.
