Comment: USD/JPY rally capped again by daily Ichimoku cloud?
28/05/2025 03:50
May 28 (Reuters) - Despite a further push up to 144.77 early Wednesday, it seems the daily Ichimoku cloud could again cap the USD/JPY upside following a significant rally Tuesday, when it surged from an Asia low of 142.11 to as high as 144.47 EBS. Tuesday's news that Japan is mulling steps to curb long-term Japanese government bond issuance after recent spikes higher in super-long yields nL3N3RZ091 not only caused these yields to plunge but triggered significant short-covering in USD/JPY. Despite moves down in long-JGB yields on the news, there is really no doubt that Japanese yields will remain on an upward trajectory given the Bank of Japan's hawkish bias and another expected hike in its policy rate. Though maybe not immediately, it's almost certain the BOJ will hike again given sticky inflation, and as more clarity emerges over the impact of U.S. tariffs on Japan's economy nL1N3RL02J, nL2N3S0014. USD/JPY, for its part, also remains on a downward trajectory despite Tuesday's blip up. The descending daily Ichimoku cloud has resisted bounces in the pair since the breakdown below it on February 5, and has proved to be a soft ceiling following a test up to 148.65 on May 12. Though currently back in the 143.89-147.34 cloud, if only barely, there are no other factors on the horizon at this time to argue for further pushes to the top or above the cloud despite the preponderance still of JPY short positions nL6N3RV0SU. Previous comments nL1N3RU01G, nL1N3R102L. For more click on FXBUZ USD/JPY: https://tmsnrt.rs/3FsgFdk Yield on JGB 20s: https://tmsnrt.rs/4jk6Hc1 Bank of Japan's policy rate: https://reut.rs/45nSPtG (Haruya Ida is a Reuters market analyst. The views expressed are his own) ((haruya.ida@thomsonreuters.com;))