June 21, 2021 13:35:45

The yen has been relishing the volte-face by the Fed as it finally wakes up bond markets to rising price pressures and rates. It has been the strongest major in the wake of last week’s FOMC due to long end bond yields falling, which have a strong correlation to USD/JPY, and short position adjustment and deleveraging helping JPY outperformance.

USD/JPY uptrend continues

The upward trendline from the April lows is proving good support with USD/JPY making a series of higher highs and higher lows in a shallow bullish channel. Last week’s high didn’t quite make the year-to-date top at 110.96. That said, buyers have stepped in today with 10-year US yields off their lows as the pair neared the upward trendline and are endeavouring to break above the early June highs. Bullish momentum has stabilised but is still above 50 on the daily RSI which potentially points to another attempt at 110.82, last week’s high. Support sits at the upward trendline mark at 109.64 with the 50-day SMA at 109.15.

CAD/JPY finds support

Like other yen crosses, CAD/JPY has sold off sharply as bonds yields have collapsed. Previous support at 89.58 failed to hold last week and the 50-day SMA also held off Friday’s buyers. The pair is currently trading above the high made at the start of April at 88.31 and this now acts as first support. This tallies with the lower Keltner band which has proven to be a mark from which prices have bounced quite well in the recent times it has touched this indicator. Similarly upward momentum has picked up on the RSI, with a reading close to 30 quite rare on the daily and a point from where prices do tend to retrace.