The US 10-Year Yield and USD/JPY correlation is back!
The US 10-Year Yield had been rising since August 2nd in an ascending wedge formation until it broke above the top trendline, making a high on October 21st at 4.335%. As often is the case, when price (or in this case yields) fail to hold a breakout on one side of the pattern, it often moves to test the opposite side. The key US yield finally broke below the bottom of trendline of the pattern on November 10th, 2022, and moved aggressively lower (recall that on November 10th, 2022, the US released a very weak CPI print. Since then, US 10-Year Yields have traded in a range between 3.321% and 3.90%. The 50% retracement from the low of August 2nd, 2022, to the high of October 21st, 2022 is 3.426%, however, it has acted as support multiple times for the benchmark yield.
Source: Tradingview, Stone X
On a 240-minute timeframe, yields are currently within the previously mentioned range near 3.80%. If yields break prior highs at 3.90%, they will have formed a double bottom pattern. The target for a double bottom is the height from the bottom to the breakout point, added to the breakout point. In this case the target is above the October 21st, 2022 high, near horizontal resistance from 2007 at 4.473%.
Source: Tradingview, Stone X
Below is a daily chart of USD/JPY. In the bottom panel of the chart is the correlation coefficient between USD/JPY and US 10-year yields. The current correlation coefficient is +0.93. Readings above +.80 are considered statistically significant. A reading of +0.93 means that when US yields move in one direction, there is a strong correlation and USD/JPY should move in the same direction. A reading of +1.00 is a perfect correlation and indicates that the two assets move together 100% of the time. Notice that the correlation has only recently moved back into relevant territory on February 13th. Prior to this, the two assets haven’t been correlated in 2 months!
Source: Tradingview, Stone X
USD/JPY has also been trading in a range since mid-December 2022 between 127.22 and 134.50. The pair recently has broken above channel resistance, a downward sloping trendline dating to December 15th, 2022, and the 50-Day Moving Average. If USD/JPY moves above recent highs at 134.77 (most likely with a move higher in 10-year yields), there is a confluence of resistance at the 38.2% Fibonacci retracement from the October 21st, 2022, highs to the January 16th lows and the 200-Day Moving Average between 136.66 and 136.85. Above there is horizontal resistance at 138.35 and then the 50% retracement level from the above-mentioned timeframe at 139.58. However, if US yields move lower, it may pull USD/JPY lower with it. First support is the 50-Day Moving Average at 132.02. Below there, the pair can fall to the February 10th lows at 129.80, then the downward sloping trendline near 129.30.
US 10-Year Yields and USD/JPY currently have a strong correlation coefficient of +0.93. Readings above +0.80 are considered strong. Therefore, to get a better idea of where USD/JPY may be headed, keep an eye on US yields. If they move higher, USD/JPY is likely to move with them. However, if yields pullback, watch for USD/JPY pull back as well.
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.
FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.
FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.
GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2025