USD/JPY soars to 34-year high amidst rising US yields, risk aversion

■USD/JPY continues its ascent, breaking past 154.00, driven by strong US economic data and risk aversion from Middle East tensions.

■March's robust US Retail Sales highlight ongoing consumer strength, pushing up US Treasury yields.

■Japanese officials voice worries over swift currency fluctuations, staying in close contact with global partners on financial and FX market developments.

The US Dollar extended its gains versus the Japanese Yen in early trading in the North American session, climbing above the 154.00 figure, although Japanese officials remain wary of the fast advance of the currency. Nevertheless, the USD/JPY exchanges hand at 154.37, up by 0.71, refreshing 34-year highs.

US Dollar strengthens against Yen, despite verbal intervention by Japanese officials

Over the weekend, developments in the Middle East spurred risk aversion in the financial markets. Due to remaining closed, Bitcoin was the main loser, though it has trimmed some of the pain inflicted on risk appetite. Iran’s offensive against Israel finished without casualties, though Tehran made its point that they would not remain arms crossed if Israel escalated the conflict.

According to Bloomberg, some US officials speaking anonymously said that the White House is urging Israel against retaliation.

Aside from these developments, economic data from the United States (US) sponsored the USD/JPY last leg-up, though it remains shy of cracking the 150.00 mark.

 The US Department of Labor revealed that Retail Sales in March rose by 0.7% MoM, above expectations of 0.4%. This shows an increase of 2.1% in Q1 2024 compared to last year's first quarter, an indication of consumers' strength.

Following the data, US Treasury yields are skyrocketing, with the short and long end of the curve rising more than 10 basis points (bps).

Fed’s Williams look for cuts in 2024

In the meantime, New York Fed President John Williams said that his baseline scenario projects rate cuts “will likely start this year.” He thinks the policy is restrictive, adding that strong fundamentals are driving consumer spending.

On the Japanese front, officials remain vocal, emphasizing that fast Forex moves are undesirable and should reflect fundamentals. Recently, a Senior Japan MoF Official said they’re in frequent and regular talks with the US and other countries' authorities on financial and FX market moves.

USD/JPY Price Analysis: Technical outlook

From a technical standpoint, the USD/JPY rally might continue if not for Japanese authorities jawboning, capping the uptrend. If the pair remains bid, it could test 155.00, seen as the line of the sand that might increase tension in the major, and it could trigger intervention by authorities. Conversely, if USD/JPY dips below 154.00, look for a test of the April 12 high turned support at 153.39, followed by the 153.00 mark.