The USDJPY traded to the highest level in over 20 years on Monday taking out the swing hi from April 28 at 131.242. However the high price could only reach 131.342 before rotating back to the downside. Buyers turned to sellers on the failed break and the price started a rotation to the downside.
Meanwhile yields in the US saw declines as well. The high yield for the 10 year yield reached IT'S cycle high on Monday as well at 3.203%. The yield bottomed yesterday at 2.815%. Today the yield is up to 2.911%. The USDJPY price action is mimicking the yield moves (at least for now).
The subsequent moved to the downside, saw the pair tumbled yesterday as yields also fell. However the low price of 127.508 stalled ahead of a swing area going back to April 19 to April 27 between 127.337 and 127.434.
Were there is some dip buyers near that area? It seems that way.
The corrective move to the upside off that low saw the pair extend above the 38.2% retracement of the move down this week at 128.973, but fall short of the 50% retracement at 129.425. The high price today reached 129.351.
Technically, watch the 128.63 level for support on any downside move today. A move below that level – and staying below that level - would give the sellers against the 50% midpoint today at 129.425 added confidence. Conversely, a move above the 50% retracement 129.425 would have traders looking toward the falling 100 hour moving average 129.705. The 200 hour moving average is above that level at 129.93 currently (and moving lower).
Meanwhile keep an eye on the trends in the US yields. Higher yields should lead to a higher USDJPY. That was the pattern this week.