US Dollar Flies as US Yields Spring Back to Life, Setups on USD/JPY, AUD/USD

US DOLLAR FORECAST – USD/JPY AND AUD/USD

• The U.S. dollar gains as U.S. yields mount a solid comeback
• USD/JPY bounces off trendline support, reclaiming the 147.00 handle
• Meanwhile, AUD/USD turns lower after failing to take out overhead resistance

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The U.S. dollar, as measured by the DXY index, staged a bullish turnaround on Monday, bolstered by a solid rally in U.S. yields. Treasury rates have been declining in recent weeks on the assumption that the Fed would move to slash borrowing costs aggressively in 2024, but the move started to unwind somewhat, as easing expectations appear to have gone too far too soon.

Against this backdrop, the Japanese yen and Australian yen weakened against the greenback at the start of the new week, reversing some of their recent gains. In this article, we analyze the technical outlook for USD/JPY and AUD/USD, taking into account market sentiment and price action dynamics. We also examine key levels that may act as support or resistance later this week.

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USD/JPY TECHNICAL ANALYSIS

USD/JPY dropped sharply and closed underneath its 100-day moving average last week. However, the downward momentum faded on Monday when prices failed to break below channel support near 146.00, paving the way for a modest bounce above the 147.00 handle. If gains pick up pace in the coming days, initial resistance stretches from 147.15 to 147.30. On further strength, the focus turns to 149.70, followed by 150.90.

In the scenario of a bearish reversal, technical support is located around the 146.00 area, which corresponds to the lower limit of a medium-term ascending channel in play since March. Moving lower, market attention shifts to 144.50, with a potential retreat towards 144.00 likely should the previously mentioned threshold be invalidated.

USD/JPY TECHNICAL CHART

USD/JPY Chart Created Using TradingView

If you're curious about what lies ahead for the Australian Dollar and the important market catalysts to track, download the Aussie’s quarterly outlook here!

AUD/USD TECHNICAL ANALYSIS

AUD/USD suffered a moderate setback on Monday, with prices turning lower after failing to push above trendline resistance near 0.6665. If losses deepen in the coming trading sessions, primary support rests around 0.6575, where the 200-day simple moving average converges with several swing lows from 2022 and 2023. Extended weakness could lead to a retest of 0.6525.

Conversely, if the bulls regain decisive control of the market and manage to push the exchange rate beyond 0.6665, upward impetus could gather strength, creating the right conditions for a rally toward the psychological 0.6800 level. The pair may struggle to breach this barrier, but in case of a clean breakout, we could see a move towards 0.6900.

AUD/USD TECHNICAL CHART

AUD/USD Chart Created Using TradingView