• US dollar rises across the board in American hours.
• USD/JPY heads for highest daily close in years.

The USD/JPY broke to the upside during the American session amid higher US yields. After moving during hours around 125.35, the pair gained momentum and printed a fresh daily high at 126.00. As of writing, it is hovering around 125.85/90, and could post the highest daily close since 2002.

Higher US yields contribute to the stronger greenback across the board. The US 10-year yield climbed to 2.79% and the 30-year jumped from 2.81% to 2.89%, the highest level since 2019. At the same time, the DXY also hit multi-year highs above 100.50.

Economic data from the US came in mixed. Retail sales rose 0.5% in March after a positive revision to February’s figures. Initial Jobless Claims rose to five-week highs at 185K. The preliminary reading of the consumer sentiment index from the University of Michigan improved against expectations to 65.7 in April.

Rally goes on

The outlook for USD/JPY remains positive supported by the divergence between the Fed and the Bank of Japan. Since early March, it gained 1000 pips and it is starting to consolidate above a long-term resistance area seen around 125.00.

The main risk for the bullish outlook is market sentiment. A deterioration could lead to sharp losses in equity markets boosting Treasuries, that should weaken USD/JPY.

Technical levels