TechnoMeter

A bullish bias remains after USD/JPY broke above a three-year trendline and continues to trade strongly in a supportive market. Supportive forces include Japanese equities via the Nikkei 225 that is testing 2018 highs (just like USD/JPY,) alongside the highly correlated (40-day rolling at +0.8921) US Treasury 2yr yield that has risen from 2.58 in mid-August when USDJPY traded at 109.97 to 2.839 today, which is a rise of 25.4bps or 9.8% as the Fed is expected to be more hawkish on an overheating US Economy.



Traders should also note the atrocious bid-to-cover ratio on Monday's US Treasury 2yr auction. The bid/cover of 2.44 was at the lowest percentile of the last 12 auctions. Such a weak bid-to-cover signals weak demand for front-end US Treasuries that could mean the yield is likely to move higher, and could take USD/JPY higher with it.

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