USD/JPY Forecast: Supported by dollar’s demand and rising yields

USD/JPY Current price: 104.74

• US Treasury yields advanced, underpinned by encouraging US data.
• Japan will release the January Jibun Bank Manufacturing PMI, previously at 49.7.
• USD/JPY is bullish and near a fresh 2021 high of 104.93.

The USD/JPY pair jumped to 104.93 last Friday, a level that was last seen mid-November, to close the day with substantial gains in the 104.70 price zone. Demand for the American currency offset the poor tone of equities in a risk-averse scenario, boosting the pair. Additionally, US Treasury yields advanced, with the yield on the benchmark 10-year note settling at 1.07%, underpinned by encouraging US data released on Thursday.

Japan published January Tokyo inflation, which resulted upbeat, printing at -0.5% YoY. Industrial Production in the year to December fell by 3.2%, better than the -3.5% expected. Finally, the  Consumer Confidence Index contracted to 29.6 in January from 31.8 in the previous month.  At the beginning of the week, the country will release the January Jibun Bank Manufacturing PMI, previously at 49.7.

USD/JPY short-term technical outlook

The USD/JPY pair has settled above its 100 SMA in the daily chart for the first time since June last year. The 20 SMA has turned north below it, while technical indicators advance within positive levels, supporting a continued advance. In the near-term, and according to the 4-hour chart, bulls are in charge. Moving averages head firmly higher below the current level while technical indicators barely retreated from extreme overbought conditions.

Support levels: 104.40 103.95 103.50

Resistance levels: 104.95 105.20 105.50

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