USD/JPY jumps to 140.00 as US yields soar

• USD/JPY rose past the 140.00 zone during the New York session.
• The US Dollar cleared daily losses amid rising US bond yields and a cautious market mood.
• Investors await Q1 Gross Domestic Product data from Japan.

The USD/JPY pair rose for a second consecutive day on Wednesday to currently trade around 140.00. On the other hand, as per the DXY index, the USD weakened against most of its rivals earlier but cleared daily losses finding support at 103.66 and recovering above 104.00 on the back of significant increases in the US bond yields. Another surprising rate hike, this time by the Bank of Canada (BoC), increased slightly the hawkish bets on the Fed.

BoC surprise decision fueled hawkish bets on the Fed

Market expectations for the upcoming June 13-14 Federal Reserve (Fed) still favour a no-hike despite the BoC surprise hike on Wednesday boosted prospects of another Fed hike.  According to the CME FedWatch Tool, investors are betting on higher odds (64.7%) of the Fed not raising interest rates with expectations of maintaining the target rate at 5.25% but the probabilities of a 25 bps hike jumped to 30%

Against this backdrop, the US bond yields are seeing increases across the curve. The 10-year bond yield rose to 3.78%, while the 2-year yield stands at 4.59% and the 5-year yielding 3.94%, all up on the day,  lifting the US Dollar.

On the other hand, the Yen's decline might be limited by speculations of Japanese authorities intervening in the markets to support the domestic currency. For Wednesday’s session, a cautious market mood amid weak Chinese economic data reported during the Asia session weighed on the JPY as it fueled a risk-off market mood.

USD/JPY levels to watch

According to the daily chart, the USD/JPY holds a neutral to bullish outlook for the short term. The Relative Strength Index (RSI) holds resilient above its midline while the Moving Average Convergence Divergence (MACD) fell slightly to the negative zone, but the pair trading above the 20-,100- and 200-day Simple Moving Averages (SMAs) suggests that the overall technical outlook is positive for the pair.

If USD/JPY manages to move higher, the next resistance to watch is at the 140.00 level, followed by the 140.50 zone and the psychological mark at 141.00. On the other hand, the 139.50 zone level is key for USD/JPY to maintain its upside bias. If breached, the pair could see a steeper decline towards the 139.00 psychological level and weekly low and then at the 20-day Simple Moving Average (SMA) at 138.60.

USD/JPY daily chart