USDJPY Advances Along With Short-term Yields

At the same time, the dollar index rose above 97 for the first time since July 2020. At the time of writing, the USDJPY pair advanced 0.5% to trade near 115.50.

Expectations of Fed tightening sent the policy-sensitive US two-year yield to 1.208%; levels last reached in February 2020. The benchmark 10-year yield slipped slightly to 1.835% today, hitting a high of 1.88% on Wednesday. The spread between the ten and two-year bond yields fell to its narrowest since late 2020 as investors priced in a faster pace of rate rises in the medium-term.

It looks like the significant support near 113.60 sent the greenback higher, and it is now approaching the November highs of 115.50. Once the USD pushes above that level, we could see a quick rally toward the current cycle highs above 116.00.

The USDJPY pair tends to be heavily correlated to short-term US yields, so it is somewhat surprising to see this stagnation lately. 

On the other hand, should the USD lose its bullish momentum, the short-term support could be found at 115, with another demand area probably at around 114.70.

The MACD indicator is about to send a bullish signal on the daily chart, possibly confirming the current uptrend momentum.