USD/JPY price analysis: yen rallies as US yields and dollar collapse

Data current as of 2/1/2024

Key points

• USD/JPY down more than 100 pips in the last week
• US Treasury yields fell below 4% again
• US dollars, yields positively correlated
• Yields higher, dollar higher, vice versa
• 66% of USD/JPY traders are short

US yields' effect on dollar-yen

In recent developments, US Treasury yields have dipped below the 4% mark once again. These yields are a significant indicator of investor sentiment and economic health, often reflecting the level of risk that market participants are willing to accept. Typically, Treasury yields and the US dollar share a positive correlation, meaning that when yields rise, the dollar often strengthens, and conversely, when yields fall, the dollar tends to weaken.

This correlation is crucial for traders to understand, as it can influence the USD/JPY exchange rate. When US Treasury yields are higher, they can attract investors looking for a safer asset with a reasonable return, thus increasing demand for the dollar. In contrast, lower yields can deter investors, leading to a decrease in the dollar's value.

Currently, an overwhelming majority of tastyfx USD/JPY traders - 66% - hold short positions, betting on a continued decline of the dollar against the yen. This sentiment reflects a broader market expectation that the dollar may face further headwinds in the short term. Traders taking short positions anticipate that they will be able to buy back the currency pair at a lower rate in the future, capitalizing on the downward trend.

The current scenario presents both opportunities and challenges for traders. While a falling dollar can signal potential for short positions, it is also essential for traders to conduct thorough analysis and remain vigilant to market trends and economic indicators. Keeping an eye on factors such as Federal Reserve policies, geopolitical events, and other economic data that can influence Treasury yields will be crucial for informed trading decisions.

All data and video are current as of 1/31/2024

How to trade USD/JPY

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on USD/JPY

Trading forex requires an account with a forex provider like tastyfx. USD/JPY can be found in tastyfx's platform under the 'Major' pairs tab. Many traders also watch major forex pairs like GBP/USD and AUD/USD for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.