USD/JPY rises but Nikkei remains weak, yield curve flattens

Yen is on the back foot in Asia despite which the benchmark Nikkei index is trading weak. Meanwhile, the JGB yield curve has flattened, just two days after BOJ announced yield curve control to engineer a steeper yield curve.

USD/JPY pair was last seen trading around 101.15. The pair clocked a low of 100.69 before clocking a high of 101.24 levels.

JGB – 1-year and 6-month yield inversion

The yield on the 1-yr Japanese government bond (JGB) is trading around -0.26% while the yield on the 6-month JGB is hovering around -0.205%.  The inversion at the short-end of the curve clearly contradicts what the BOJ is attempting to do with yield curve control.

Meanwhile, Nikkei index is trading 0.20% lower, which is surprising given the rise in the USD/JPY pair.

USD/JPY Technical Levels

Acceptance above 5-DMA level of 101.18 would expose 102.00-102.78 (Wednesday’s high). Only a daily close above 102.78 would force bears to unwind shorts leading to a quick rise to 104.32 (Sep 2 high).

On the other side, acceptance below 100.71 (50% Fibo) would open doors for 100.00 (psychological support) levels. On a larger scheme of things, a violation at 98.90 is largely seen blowing stops and thus could yield a quick fire drop to 97.00 levels.