Daily Analysis USDJPY - 18 May 2023

The US dollar demonstrated a strong rally against the Japanese yen during Wednesday's trading session, driven by sustained upward pressure. This market environment is partly influenced by the Bank of Japan's yield curve control policy, which involves injecting the Japanese yen into the market to prevent interest rates from surpassing 50 basis points.

The current interest rate differential between the two central banks also contributes to the weakness of the yen. This is evident in the correlation between the yen and the US 10-year Treasury yield, which currently stands at around 3.57%. Furthermore, the yen is approaching a resistance level of 137.60.

A weaker yen has been beneficial for Japan's exports, as reflected in recent data and the country's GDP figures. Tourism has become a sector of growth for Japan following the COVID-19 lockdown measures.

From a technical standpoint, on a 1-day chart, the currency pair is approaching a significant resistance level that has held firm for the past three attempts. This could potentially be the fourth attempt, and a breakout above this level appears increasingly likely. The strength of the US dollar against other major currencies, combined with the anticipation of interest rates being maintained above market expectations, further supports this possibility.

Resi Level 3	Resi Level 2	Resi Level 1	Suppo level 1	Suppo level 2	Suppo level 3
140.00	139.50	137.70	137.00	136.50	135.50