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USD/JPY breakout of the 61.8% retracement confirmed by the bond market

USD/JPY longs were the FX trade of the year in 2022 and today’s strong employment numbers make it more likely that the trend will not be. yet finished.

The pair is up 220 pips today at 135.06.

The gain erases much of a steep four-day drop in the pair. Technically it breaks the 61.8% retracement of that move and is now about 250 pips out and back. It is also back above the 55-day moving average, which stands at 134.04 today.

The July 22nd low at 135.56 has offered some resistance so far and is a short-term marker to watch.

What is encouraging for the bulls is that the latest rally came on bullish fundamental news. This was also confirmed by a strong move in bonds and fed funds futures. US 2-year yields rose 20 basis points today to 3.24%. This erased the drop in late July/early August. It is important to note that this decline coincided with the decline of USD/JPY.

The big risk in the week before Wednesday’s US CPI report. A high number would increase the odds of a 75 basis point cut in September. They are currently at 68%, which is a big jump from the 40% before the nonfarm payrolls report. A soft CPI would bring this down while a strong figure would go a long way to cement it.


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