BUZZ-COMMENT-How much longer will USD/JPY bulls hold the advantage?

USD/JPY bulls remain in control, though time may soon run out.

Thursday's decline in U.S. jobless claims may increase anticipation of a strong payrolls report, though the figures cover different survey periods. Though a soft ISM employment reading on Friday might temper optimism, the broader dollar-positive trend of U.S. economic outperformance appears intact -- with implications for USD/JPY.

The correlation between 10-year Treasury yields and USD/JPY has strengthened as the curve steepens and is, by one measure, near a multi-year high. Surging oil prices should keep those back-end Treasury yields elevated.

Recent weakness in the S&P 500 has not deterred USD/JPY buyers, with the correlation between the two inverted.

These factors, alongside the potential risk of U.S. tariffs, support a bullish outlook for USD/JPY. However, at least two factors are preventing further gains.

First, the 10-year Treasury yield is struggling to reach the April 2024 high near 4.70% as long as the Fed is easing. Second, the Bank of Japan remains hesitant to raise rates before the outcome of Japan's wage talks. Next week, additional data on Japanese consumer sentiment, overtime pay, and survey results will be watched for more insights.

USD/JPY needs to eclipse the December high at 158.09 to maintain upward momentum. Otherwise, there is a risk of sinking back below 155 toward its daily cloud top near 153.

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(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

((robert.fullem@thomsonreuters.com;))