The USD/JPY broke to the upside during the American session amid higher US yields. After moving during hours around 125.35, the pair gained momentum and printed a fresh daily high at 126.00. As of writing, it is hovering around 125.85/90, and could post the highest daily close since 2002.
Higher US yields contribute to the stronger greenback across the board. The US 10-year yield climbed to 2.79% and the 30-year jumped from 2.81% to 2.89%, the highest level since 2019. At the same time, the DXY also hit multi-year highs above 100.50.
Economic data from the US came in mixed. Retail sales rose 0.5% in March after a positive revision to February’s figures. Initial Jobless Claims rose to five-week highs at 185K. The preliminary reading of the consumer sentiment index from the University of Michigan improved against expectations to 65.7 in April.
The outlook for USD/JPY remains positive supported by the divergence between the Fed and the Bank of Japan. Since early March, it gained 1000 pips and it is starting to consolidate above a long-term resistance area seen around 125.00.
The main risk for the bullish outlook is market sentiment. A deterioration could lead to sharp losses in equity markets boosting Treasuries, that should weaken USD/JPY.
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