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USD/JPY break above 112.50 as US yields soar

  • Yen tumbles after short-lived recovery. 
  • US bond yields rise sharply and equity prices jump. 
  • US Senate debates tax bill. 

The USD/JPY pair rose almost a hundred pips from daily lows and rose above 112.50. It broke above previous highs and reached 112.64, the highest level since November 21. As of writing, remains near the top of the day, holding a strong bullish tone. 

The Japanese currency tumbled across the board during the American session. Versus the euro fell to the lowest in a month and close to multi-year lows and to the weakens in two months against the pound. A sharp rise in US bond yields accelerated the slide of the yen. 

The US 10-year yield finally rose above 2.40% and climbed to 2.43%, the highest in a month. At the same time, equity prices in Wall Street continued to trend higher. The Dow Jones reached levels on top of 24,300 for the first time ever; it was up more than 1%. 

The debate on the tax bill reform is taking place at the US Senate. The bill is likely to pass but is not the definitive. The House of Representatives passed a different bill and it would need to be reconciled with the Senate version. 

Levels to watch 

To the downside, immediate support is now seen at 112.40, followed by 112.15 (Nov 29 high) and 111.70 (Nov 27 high). On the upside, FXStreet's technical confluence indicator detects resistance areas above daily highs at 112.85, 113.30 and 113.80. 

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