Macro Analysis
**USD/JPY Defies Gravity: Price Holds Firm Even as Yield Spread Collapses**
Analyzing the daily chart, USD/JPY shows a significant technical development. After trading in a broad range between roughly 155.00 and 159.00 for several months, the pair has broken down. It is now testing the lower end of its recent range, with the late-February drop pushing it toward the 155.00 area. This move below previous support suggests increasing selling pressure.
The relationship with the US-Japan 10-year yield spread is currently the standout macro factor. Historically, these two assets have moved together, but the recent trend shows a clear and growing divergence. While the yield spread has been in a steady downward trend since late 2025, falling from near 3.0% to approximately 1.84%, USD/JPY has remained remarkably resilient, only recently beginning to soften.
This divergence means the currency pair is not getting its usual support from widening yield differentials. The yield spread is compressing, which typically pressures USD/JPY lower, yet the pair held up for months. The recent break lower may signal that FX traders are finally starting to align price action with this underlying macro dynamic.
For traders, the immediate focus is on whether the breakdown below 155.00 holds. Key upcoming events could drive the next move. BOJ Governor Ueda’s speech could hint at policy shifts impacting Japanese yields. More directly, the barrage of high-impact US data—especially the Non-Farm Employment Change and wage figures—will be crucial. Strong US data could temporarily halt the yield spread’s decline and support the dollar, while weak data could accelerate the existing downtrend in both the spread and potentially USD/JPY. Watch for whether this decoupling between price and yields resolves with a catch-down move in the currency pair.
COT Analysis
USD/JPY has been in a clear downtrend on the daily chart, falling from above 157 to near 155 recently. This price decline aligns with a sustained negative trend in the COT data, where asset managers have been building a net-short position against dealers. The persistent bearish sentiment among these major players converges with and reinforces the current downward price momentum.
USD/JPY has trended higher recently, but the COT data shows large traders have been steadily reducing their net long positions. This creates a divergence where the price rally lacks support from institutional positioning sentiment. This divergence often warrants caution for the prevailing uptrend on the daily chart.
USD/JPY has shown a strong upward trend in price, rising from the 144 area to near 156 recently. However, the COT data for Asset Managers shows their net long positioning has been steadily declining throughout this rally. This creates a notable divergence where the price is rising while institutional sentiment, as measured by this indicator, is becoming less bullish. This divergence suggests the current price advance may not be fully supported by the positioning trends of larger institutional accounts.
