The USD/JPY price rally is accelerating as the dollar strength remains. The pair rose to an intraday high of 106.92, the highest it has been since August 28. The USDJPY has risen by more than 4% from its lowest level on January 6.
What happened: The Japanese yen declined against the US dollar even after the relatively strong data from the country. Yesterday, data by Markit revealed that the country’s manufacturing PMI increased from 49.8 in January to 51.4 in February. This was the first time that the PMI has been in the expansionary zone of 50 and above.
And today, data revealed that the country’s unemployment rate remained intact at 2.9%. This was a better performance than the median estimate of 3.0%. Further, the jobs to applications ratio increased from 1.06 to 1.10.
Why USD/JPY is rising: Therefore, the USDJPY price rose because of the overall strong US dollar. The greenback has risen sharply in the past few days after the US Treasury yields stabilised, as shown below. The yield on the ten-year has dropped from last week’s high of near 1.60% to today’s 1.415%. The 5-year and 30-year yields have also declined.
USD/JPY technical outlook
The USD/JPY pair has risen for the past six consecutive days. On the four-hour chart, the price has formed what seems to be a rising wedge pattern. It is also above the 25-day and 15-day weighted moving averages (WMA). The Relative Strength Index (RSI) has also moved to slightly below the overbought level of 70.
Therefore, while the pair may continue rising in the near term, the rising wedge pattern is hinting at a possible downward reversal. If this happens, the next key level to watch will be 106.22.
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USDJPY technical chart