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USD/JPY took its cues from U.S. Treasury yields and extended its intraweek gains yesterday.

Is the short-term downtrend over for the pair?

Before moving on, ICYMI, yesterday’s watchlist checked a trend pullback setup on GBP/AUD ahead of Australia’s CPI release. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

U.S. CB consumer confidence unexpectedly improved from 103.4 to 104.2 in March but showed consumers cutting back on discretionary spending like amusement parts, lottery, and dining out.

U.S. single-family home prices were up by 3.8% y/y in January and marked its ninth straight month of deceleration as mortgage rates resumed their downtrend.

The US trade deficit widened by 0.6% m/m in February to $91.6B – the widest since October – as the decline in the value of exports outpaced the decline in the value of imports.

Canada posted a budget deficit of 6.44B CAD in the first ten months of the 2022-2023 fiscal year, down from the 75.29B CAD deficit in the same period last year.

Fed’s vice chair for supervision Michael Barr called SVB’s failure “a textbook case of mismanagement” and that “the full extent of the bank’s vulnerability was not apparent until the unexpected bank run on March 9.”

The U.S. imposed new trade restrictions on five Chinese companies over “human rights violations” against the Uyghur Muslim community.

The yield on the 2-year U.S. Treasury note jumped back above 4% and put pressure on the U.S. tech sector.

API showed U.S. crude oil inventories dropping by 6.076 million barrels in the week ended March 24 after a 3.262 million-barrel build in the previous week.

Australia’s inflation decelerated from 7.4% to an eight-month low of 6.8% in February and supported a pause in RBA’s rate hikes.

BOJ Deputy Governor Shinichi Uchida says some changes to the yield curve plans “may become necessary” if “various conditions fall in place.”

Alibaba’s decision to split its holding company into six different business groups pointed to China’s looser stance on the tech sector and helped boost risk appetite during the Asian session.

Price Action News

Overlay of JPY Pairs 15-min

Overlay of JPY Pairs 15-min

The safe-haven yen slowly but surely lost value against its major counterparts during the Asian session.

There’s no one big catalyst for the coordinated weakness but higher U.S. Treasury yields may have factored in USD/JPY’s strength and other yen counterparts may have followed suit.

Meanwhile, news of Alibaba splitting its holding company into six business groups energized the Asian markets since China allowing the move is encouraging for China’s tech sector.

JPY has recouped some of its losses against AUD and NZD but the safe-haven continues to make new intraday lows against the others during the European session.

Upcoming Potential Catalysts on the Economic Calendar:

UK’s mortgage approvals and net individual lending at 8:30 am GMT
UK’s Financial Policy Committee (FPC) quarterly statement and meeting minutes at 9:30 am GMT
SNB’s quarterly bulletin at 1:00 pm GMT

US pending home sales at 2:00 pm GMT
EIA crude oil inventories at 2:30 pm GMT
NZ building consents at 9:30 pm GMT
NZ ANZ business confidence at 12:00 am GMT (Mar 30)

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

USD/JPY: 15-min

USD/JPY 15-min Forex Chart

USD/JPY 15-min Forex Chart by TradingView

Higher U.S. Treasury yields have helped bust USD/JPY from its 130.50 intraweek support levels to its current 131.80 prices.

It’s interesting to note that USD/JPY’s upswing yesterday has propelled the pair above a trend line resistance that was solid for at least two weeks.

Will yesterday’s breakout translate to sustained bullish momentum?

USD/JPY is already having trouble breaking above the 132.00 psychological level that’s near the R2 of today’s Standard Pivot Points.

If U.S. Treasury yields extend their gains today, or if risk-taking weighs on JPY more than USD, then USD/JPY could head for higher inflection points like 130.50. This would mark a full ATR move.

But if Treasury yields see pullbacks, or if yen repatriation ahead the end of the month boosts demand for JPY, then USD/JPY could retrace to the broken trend line resistance.