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Japanese Yen Tanks as Crude Oil Surges Higher on Energy Crunch. Will USD/JPY Keep Going?

Japanese Yen Tanks as Crude Oil Surges Higher on Energy Crunch. Will USD/JPY Keep Going?

Daniel McCarthy,

Japanese Yen, USD/JPY, Crude Oil, US Dollar, Coal - Talking Points

  • Japanese Yen was undermined by widening yields and higher energy prices
  • Bank of England hawkish comments helped GBP/USD find some strength
  • Central bank talkers will be watched today for inflation opinions

USD/JPY moved to its highest level in 2 years today as oil, gas and coal continued to maintain lofty levels. Japanese Prime Minister Fumio Kishida also ruled out introducing a capital gains tax. The weak Yen helped to boost the Nikkei 225 index while other Asian equities were mixed.

US jobs data on Friday disappointed markets and long end US Treasury yields went to their highest levels since June, with 10-years now at 1.61%. Other G-10 yields followed suit, except for Japan, putting more pressure on the Yen.

Torrential rain in China has seen almost 10% of their coal mines cease operations for now, forcing coal futures higher. Brent crude oil marched past US$80 a barrel.

Bank of England Governor Andrew Bailey and fellow monetary policy committee member Michael Saunders both made hawkish remarks as they expressed concern about inflation running too high. Sterling rallied above 1.3670 on the comments.

Looking ahead, there are a number ECB members speaking today and Chicago Fed President Charles Evans is also expected to hit the wires.

USD/JPY Technical Analysis

USD/JPY has made a fresh high today as momentum indicators appear bullish for now.

The 21-day simple moving average (SMA) is well below the current level and the Bollinger Band based of it has widened as volatility increased with this break higher. The price has moved outside of the upper band and a move back inside might indicate a pause in bullish momentum.

For now though, all short, medium and long term SMAs have a positive gradient as represented by the 10-day, 21-day, 55-day and the 200-day SMAs.

Since making the Golden Cross, USD/JPY has moved higher. Support could be at the pivot points of 112.079, 110.802 and 110.447.

USD/JPY CHART

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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