Ten-year yield below 4.36% signals USD/JPY breakdown

With 4.36% now the fulcrum of May’s 4.15%–4.57% range, a yield drop reaffirms Fed dovish bets and undercuts USD/JPY—failure below 142.39/142.11 opens the door to 141.00, while a yield rebound above 4.44% can spark a USD/JPY bounce into 143.42/144.20.

1. Fundamental highlights

• Fed policy & inflation dynamics
• Decelerating core inflation: Core CPI and PCE readings have moderated in recent months (core CPI ≈ 3.2% YoY), reinforcing market expectations that the Fed’s “terminal rate” is near or already reached.
• Data-dependent Fed: Fed speakers (Powell, Brainard) remain cautious, stressing “patience” and indicating that any rate cut would depend on further disinflation. Soft economic data (weaker services PMIs, below-forecast retail sales) support a prolonged Fed pause or eventual cuts by late 2025.
• Fed funds futures: Markets imply < 20% chance of another rate hike in 2025 and ~30–40% chance of a cut by Q4 2025, capping U.S. real yields and weighing on the dollar.
• U.S. economic data flow
• Labor market cooling: May’s ADP private payrolls (37k vs. 110k est.) and ISM Services (below 50) pointed to a deceleration in hiring and services growth, denting dollar sentiment and keeping 10-year yields pinned.
• Retail sales & industrial output: Mixed prints—some resilience in consumer spending but factory output showing signs of slowing—create a neutral bias for yields until June CPI and PPI releases.
• BOJ policy & JGB backstop
• Yield curve control (YCC): The BOJ continues to cap 10-year JGB yields near 0.5%. Despite incremental signs of inflation creeping above 1%, the BOJ maintains ultra-easy settings.
• JGB buying: Whenever bids evaporate, the BOJ intervenes to buy JGBs, keeping Japanese yields low and sustaining a large yield differential in favour of U.S. Treasuries—this dynamic underpins USD/JPY until JGB yields rise meaningfully.
• Global risk sentiment & safe-haven flows
• Trade & geopolitics: Ongoing U.S.–China trade uncertainty and Middle East tensions spur intermittent safe-haven demand for JPY. Any fresh tariff headlines or geopolitical flare-ups can cause short-term yen strength.
• Equity volatility (VIX): Spikes in U.S. equity volatility often coincide with bid-side pressure on U.S. yields (lower yields) and a stronger yen. Watch for large equity swings as a barometer for both yield and USD/JPY direction.
• Cross-asset correlations
• Yield → USD/JPY link: Historically, when 10-year U.S. yields breach below 4.36%, USD/JPY tends to weaken toward its demand zones (142.39/142.11). Conversely, a rally above 4.44% supports a USD/JPY bounce into 143.42/144.20.
• Gold & yen inverse to yields: Falling yields often coincide with gold rallies and yen strength; rising yields tend to pressure gold and support USD/JPY.

2. Technical trading plan for ten-year US Treasury yield (US10Y)

(Chart timeframe: 4-hour)

A. Key levels and zones

Resistance / supply:

• 4.57%: Major May swing high (primary supply).
• 4.50%: Minor supply peak in mid-May.
• 4.44% / 4.40%: Intermediate resistance cluster (H4 swing points).
• 4.36%: Center of May’s range; current pivot.

Support / demand:

• 4.23% – 4.19%: Early May low range; volume‐profile demand cluster.
• 4.15%: Strong demand from May 1st swing low.
• 4.10%: Secondary demand from April consolidation.
• 4.02%: March–April accumulation zone (large volume node).
• 3.90% – 3.86%: April’s major swing low (structural support).

B. Current price context

• Trading at ~ 4.36%, the mid-point of May’s 4.15%–4.57% range.
• Pullback from 4.57% late May—4.36% has acted as interim support.
• A 4-hour close below 4.36% signals failure of the late-May relief rally, likely accelerating toward 4.23%/4.15%.
• A bounce above 4.44%–4.50% would imply renewed hawkish repricing and open the door to retests of 4.57% and potentially higher.

C. Trade scenarios for US10Y

Bearish (primary)

• Trigger / entry: 4-hour candle closes below 4.36%; best if followed by a retest of 4.36% as resistance. Early entry: break below 4.32% (lower wick) with expanding volume.
• Initial stop‐loss (SL): Place SL just above 4.44% (allow buffer above minor supply).
• Profit targets (TP): TP1: 4.23% (first demand zone); TP2: 4.15% (major May low); TP3: 4.10% (April consolidation); TP4: 4.02% (March–April volume node).

Trade management:

At TP1 (4.23%), lock in 30–40%, trail SL to ~4.32%. At TP2 (4.15%), lock in another 30%, move SL to breakeven (4.36%). Evaluate remaining position into TP3/TP4 depending on Fed/data inputs.

Bullish (countertrend)

• Trigger / entry: 4-hour candle closes above 4.44%, confirming rejection of 4.36%. Alternatively, break above 4.50% with strong momentum.
• Initial stop‐loss (SL): Place SL just below 4.36% (new support), e.g., 4.34%.
• Profit targets (TP): TP1: 4.50% (next supply); TP2: 4.57% (major May high); TP3: 4.70% (late-March peak).

Trade management:

At TP1 (4.50%), lock in 30%, trail SL to breakeven. At TP2 (4.57%), lock in another 30–40%, trail SL to ~4.44%. Decide on holding into TP3 only if U.S. inflation remains unexpectedly hot.

3. Technical trading plan for USD/JPY

(Chart timeframe: 1-hour)

A. Key levels & zones

Resistance / supply:

• 144.20: Major supply zone & the three-month VWAP (red line).
• 143.42 / 143.20 / 143.00: Intraday resistance cluster (volume profile/H4 pivot).
• 142.90: Near-term resistance, marks 50% retrace of recent decline.
• 142.70: POC (light blue) from volume profile; key intraday support/resistance.

Support / demand:

• 142.39: Demand zone & VWAP lower band confluence.
• 142.11: VAL (yellow) from recent volume profile; secondary demand floor.
• 141.90 / 141.74 / 141.58 / 141.39: Sequential demand zones (April–May clusters).
• 141.00: Psychological level & April minor low.
• 140.28: April swing low (major demand).

B. Current price context

• Trading at ~ 142.70–142.80, just above POC (142.70).
• Rejected at 144.20 multiple times (mid-May).
• Trapped between 144.20 supply and 142.39 demand/VWAP lower band.
• Correlation with ten-year yield: As US10Y trades below 4.36% (bearish), USD/JPY tends to gravitate down toward 142.39/142.11. If US10Y rebounds above 4.44%, watch for USD/JPY to find support at POC (142.70) and retest 143.00/143.42.

C. Trade scenarios for USD/JPY

Bearish (primary, if US10Y < 4.36%)

• Trigger / entry: 1-hour candle closes below 142.39, ideally confirmed by US10Y 4-hour close < 4.36%. Aggressive: short on a break and retest of 142.11 (VAL) as new resistance.
• Initial stop-loss (SL): Place SL above 142.70 (POC), e.g., 142.75.
• Profit targets (TP): TP1: 141.90 (first demand level); TP2: 141.58 (next demand cluster); TP3: 141.00 (psychological level); TP4: 140.28 (major demand from April swing low).

Trade management:

At TP1 (141.90), lock in 30–40%, trail SL to breakeven (142.39). At TP2 (141.58), lock in another 30%, move SL to just above 142.11. Decide on holding remaining into TP3/TP4 depending on continued yield weakness and broader risk sentiment.

Bullish (countertrend, if US10Y > 4.44%)

• Trigger / entry: 1-hour candle closes above 142.90 – 143.00, preferably confirmed by US10Y 4-hour close > 4.44%. More aggressive: entry on a retest of 142.70 (POC), turning support after a yield bounce.
• Initial stop-loss (SL): Place SL below 142.70 (POC), e.g., 142.65.
• Profit targets (TP): TP1: 143.20 (minor supply/H4 pivot); TP2: 143.42 (key volume-profile resistance); TP3: 144.00 (psychological handle); TP4: 144.20 (major supply & 200-hour VWAP).

Trade management:

At TP1 (143.20), lock in 30–40%, trail SL to breakeven (143.00). At TP2 (143.42), lock in another 30%, move SL to just above 143.00. Evaluate holding partial into TP3/TP4 if US10Y remains buoyant and equity markets remain stable.

4. Intermarket execution checklist

1. Monitor ten-year yield signals: Bearish signal: 4-hour close < 4.36% (bias toward USD/JPY short below 142.39). Bullish signal: 4-hour close > 4.44% (bias toward USD/JPY long above 142.90).
2. Coordinate entries & stops: For a bearish USD/JPY trade, wait for yield confirmation (< 4.36%), then enter short at 142.39 (1-hour close) with SL ~ 142.75. For a bullish USD/JPY trade, wait for yield rebound (> 4.44%), then enter long at 143.00 (1-hour close) with SL ~ 142.65.
3. Position sizing & risk: Risk one to two percent of trading capital per cross-asset setup. Use volume spikes and candle size expansion on US10Y 4-hour and USD/JPY 1-hour as additional confirmation before scaling in.
4. Profit-taking & trailing: Scale out 30–40% at the first target, and move SL to breakeven or the next pivot. Reassess halfway to TP2—if macro updates (Fed speak, CPI) contradict, consider partial exit. If the trade reaches TP3, trail SL to the previous demand (for shorts) or supply (for longs) level.
5. Key macro events to watch: June CPI & PPI releases (U.S.): A hot print → yields spike, USD/JPY rallies; a soft print → yields fall, USD/JPY drops. Fed speakers (Powell, Brainard): Any hawkish tilt can reverse bearish yield pressure; a dovish tilt further pressures yields and USD/JPY. BOJ minutes & inflation data (Japan): If Japan signals any tightening bias, yen may weaken, potentially limiting USD/JPY downside. U.S. Treasury auctions: Poor demand could temporarily push yields higher, giving USD/JPY a lift; strong demand would reinforce the “yield‐capped” environment, favouring low USD/JPY. Equity volatility surges: Rising VIX often coincides with lower yields and stronger yen, so be prepared to tighten stops on USD/JPY shorts.

5. Summary and action steps

• Fundamental framework: Ten-year U.S. yields are at a delicate inflexion (4.36% pivot). A break below prolongs Fed dovish expectations, colours cross-asset flows toward safe havens (yen, gold), and sets up further USD/JPY weakness. A rebound above 4.44% signals persistent U.S. rate premium and can spark USD/JPY relief rallies.
• Technical blueprint: US10Y bearish: Short below 4.36% → TP1 4.23% → TP2 4.15% → TP3 4.10% → TP4 4.02%. US10Y bullish: Long above 4.44% → TP1 4.50% → TP2 4.57% → TP3 4.70%. USD/JPY bearish (if US10Y < 4.36%): Short below 142.39 → TP1 141.90 → TP2 141.58 → TP3 141.00 → TP4 140.28. USD/JPY bullish (if US10Y > 4.44%): Long above 142.90–143.00 → TP1 143.20 → TP2 143.42 → TP3 144.00 → TP4 144.20.
• Execution: Wait for a decisive 4-hour close on US10Y (either below 4.36% or above 4.44%). Align USD/JPY 1-hour entries (short at 142.39 if yields break down; long at 143.00 if yields rebound). Manage risk with tight SLs based on volume-profile pivots (4.44% for yields; 142.70 for USD/JPY).

By integrating the ten-year yield’s technical inflexion and USD/JPY’s supply/demand framework—supported by clear fundamental catalysts—traders can capture cross-asset flows and position for either an extended yen rally (if yields drop) or a USD/JPY relief bounce (if yields hold). Always watch Fed/BOJ communications and major data releases; these will be the ultimate catalysts determining which side of the trade unfolds. Trade responsibly.

This content is for educational and informational purposes only and does not constitute financial, investment, or trading advice. Always conduct your own research and consult a licensed professional before making any trading decisions.