With Q1 2021 winding down, it’s tough to argue against the Greenback’s performance versus the majors. Values are up across the board as forex players begin to anticipate the end of many Fed COVID-19 relief policies. One of the biggest movers has been the USD/JPY. At press time (about 1:30 PM EST), the USD/JPY is up 5.7% year-to-date. Following the April-December selloff of 2020, early-2021’s bull run in the dollar/yen is a surprise.
One of the lead financial stories of March 2021 has been the sudden spike in U.S. Treasury yields. Yields on the heavily-traded US 10-year T-note have rallied from 1.4460% to 1.6380% in a bit over three weeks. The action has placed upwards pressure on lending rates, specifically 30-year mortgages. This morning’s figures from the MBA suggest that the lending environment is responding:
Event Actual Previous
MBA 30-Year Mortgage Rate 3.36% 3.28%
MBA Mortgage Applications (WoW) -2.5% -2.2%
In short, mortgage rates are up and applications are beginning to lag. While this may be attributed to a number of factors, the recent action in the debt market is a primary one. Much has been made of the U.S. real estate bubble; given these figures, one has to think that a cyclical peak may already be in.
Let’s check out the USD/JPY and see if we can spot a trade or two.
USD/JPY: Technical Outlook
The USD/JPY is in the midst of a classic daily uptrend. However, this market is also in consolidation near the Daily SMA (108.81).
+2021_03_24+(11_24_01+AM).png)
Here are two levels worth watching until Friday’s close:
- Resistance(1): 2021 High, 109.36
- Support(1): 38% Current Wave Retracement, 107.66
Bottom Line: If we see the USD/JPY post a bearish break in the near future, a buying opportunity may come into play. As long as 109.36 stays intact as 2021’s high, I’ll have buy orders in the queue from 107.71. With an initial stop loss at 107.41, this trade produces 30 pips on a standard 1:1 risk vs reward ratio.
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