USD/JPY Price Analysis: Extends the rally to five-year highs, closes in on 116.00

• USD/JPY clears November 2021 highs in a bid to recapture 116.00.
• US Treasury yields consolidate near multi-week highs on Fed rate hike expectations.
• Ascending triangle breakout on the 1D chart calls for more upside.

USD/JPY is sitting at the highest levels since January 2017, fast-approaching the 116.00 mark, as the US dollar sees a renewed buying interest across the board in Asian trading.

The major continues to draw support from the recent strength in the US Treasury yields across the curve, as investors price in a March Fed rate hike while surging Omicron covid cases globally also keep the returns on the market elevated.

It's worth noting that Treasury yields moved higher throughout 2021 amid concerns about the coronavirus pandemic and inflation. The benchmark 10-year rates jumped above 1.60%, rising as much as 13 basis points on the day.

Looking forward, the Fed-driven sentiment and covid updates will continue to have an impact on the yields, in turn, impacting the major. Also, of note remains the US ISM Manufacturing PMI for trading USD/JPY in the day ahead.

USD/JPY’s daily chart shows that the price has stormed through the ascending triangle resistance at 115.55, triggering a fresh advance to 115.81 multi-year highs. A daily closing above that resistance is needed to confirm the triangle breakout, opening doors for a rally towards 116.00.

The next critical upside target is seen at the 116.50 psychological level.

USD/JPY: Daily chart

The 14-day Relative Strength Index (RSI), however, peeps into the overbought region, warranting caution for bulls.

Any retracement will challenge the daily lows of 115.29 before taking on the 115.00 support area. Monday’s low of 114.95 will be next on the sellers’ radars.

USD/JPY: Additional levels to consider