USD/JPY rises to 10-month high as the yen sell-off accelerates

The USD/JPY rally accelerated even after the relatively strong Japanese data and the slight decline of US bond yields. The pair rose to 111, the highest it has been since March 2020.

Strong Japan data

Recent data from Japan have been relatively strong. In a report earlier today, the Bank of Japan (BOJ) released strong quarterly business survey numbers. The data revealed that the large manufacturers’ index rose from -10 in the fourth quarter to 5 in the first quarter. This was the first quarter that the figure has been positive since the fourth quarter of 2019.

The important non-manufacturers index rose from -5 to -1 in the same period. Further, the small manufacturing index improved from -27 to -13 while the big manufacturing outlook index rose from -8 to 4. 

These data came a day after the country’s statistics office said that it expects the industrial production will improve from -6.1% in March to 9.3% in April. Japan’s unemployment rate also remains at 2.9%, which is remarkable considering that the rate in other countries like the United States and Europe is above 6%.

Meanwhile, the USD/JPY reacted mildly to the relatively strong Japan manufacturing PMI numbers. The PMI rose from 52.0 in February to 52.2 in March, the highest it has been since 2019. This performance happened because of the rising domestic and international orders and the strong business confidence data. The report said:

The USD/JPY rose even after the 10-year US bond yields declined to 1.71% from this week’s high of 1.74%. The 30-year yield also dropped to 2.383% even after Joe Biden unveiled a large $2.3 trillion infrastructure plan.

USD/JPY technical forecast

The USD/JPY price rallied to 111, the highest it has been in a few months. On the four-hour chart, the rally is being supported by the 25-day and 15-day exponential moving averages (EMA) while the Relative Strength Index (RSI) is above the overbought level. 

The pair has also moved above the bullish flag pattern. Therefore, while the upward trend may continue, a short-term pullback cannot be ruled out. If it happens, the pair will likely retest the support at 110.