USD/JPY on course towards 140? Depends on US yields

March 1 (Reuters) – USD/JPY appears on course to head back towards 140 if not higher. Any further rises are likely to be dependent on higher US yields. A break above 4.0% in 10-year Treasury yields could be particularly pivotal.

USD/JPY traded to a fresh 2023 high of 136.92 Tuesday before easing back. Higher US yields helped fuel the move with 10-year yields hitting 3.983% before easing back.

A decisive break above 4.0% in the benchmark yield and towards the 4.337% trend high on Oct 21, 2022 could help USD/JPY higher still. This would require perhaps another strong US jobs report on March 10, and continuing expectations of a 50 basis-point hike by the Fed on March 22 after recent strong US economic data.

Technically, USD/JPY is holding below its descending 100-day moving average at 136.88 and 200-DMA at 137.23. Support is eyed from the ascending hourly Ichimoku cloud currently between 135.31-136.22 and especially towards the 100-HMA in the cloud at 135.77.

Japanese importers have been good buyers on recent dips, and this will continue to be the case. Institutional investor appetite for US assets also looks to have risen with yields and returns higher than before, and could be further whetted if 10-year yields return above 4%.

Likely upside USD/JPY targets include 139.57, 50% retracement of 151.94-127.21, 140.00, a good round number, and 142.49, 61.8% Fibonacci retracement of the same move.