Volatile USD/JPY Moves: What's Driving the Action

[Redator]

Another day where markets hang on to a positive sentiment following a similar picture from yesterday - risk-assets are in the green and safe-havens are lagging on the day.

The US dollar as recently shines on optimist flows from markets, though as the DXY is still trading below the 100.00 level. The Greenback is leading today's forex action.

On the other hand, the Yen is not showing such a rosy picture. Comments from the Minister of Finance Katsunobu Kato about reducing the issuance on long-end bonds made Japanese yields go down and the Yen got dragged with it.

How do yields moving down influence the Yen?

For a quick-to-understand explanation, longer-end yields have been hedging up with the latest inflation data being high - a situation where bond traders start to sell some parts of the curve to price in chances of hikes around the curve and reduce their exposure.

Funds in Japan are big buyers of all types of government bonds to provide interest, so if there is less supply of bonds and fewer bonds to buy for these entities, the rarity creates more demand, and then yields go down again.

When Yields go down in Japan, investors make more money by placing money in other higher yielding assets like US Treasuries or Equities, hence the Yen goes down. You can read more on the Yen slide here.

USD/JPY Intra-Day Technical Analysis

close

USDJPY 30M Chart, May 27, 2025. Source: TradingView

/media/images/Screenshot_2025-05-27_at_10.02.06AM.width-1400.png

USD/JPY rallied on the recent comments from the Minister of Finance Kato, forming a double bottom - now up 1.11% on the session.

Last week's USD weakness created a descending channel from which prices broke out overnight. The RSI is overbought on all timeframes below 1H but the momentum is strong.

Having just crossed the last key pivot at 144.350, eyes are on these zones:

For immediate support, there is the MA 20 standing at 143.800.
A deeper retracement would retest the most recent Support Zone situated between 143.400 to 143.530.

Keep an high on a retest of the upper-bound of the descending channel, though prices are far and would require USD weakness to retrace that much - not the theme of the day.


For resistances on a pursued breakout, look at the Resistance Zone 144.700 - 144.850.
The next key resistance eyes to the 145.00 psychological level.

Safe Trades!

Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors.
If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use.
Visit https://www.marketpulse.com/ to find out more about the beat of the global markets.
© {CURRENT_YEAR} OANDA Business Information & Services Inc.