USD/JPY analysis: bearish potential to increase below 112.60
|USD/JPY Current price: 112.80
- US Treasury yields at multi-week lows after Fed's vice-chair comments.
- Run away from high-yielding assets likely to keep boosting the JPY.
The USD/JPY pair finished the week at 112.80, its lowest since November 2, as not only risk aversion kept equities pressured and the safe-haven yen on demand, but also, US Treasury yields fell sharply, after the Fed's vice-chair, Clarida, said that rates are getting closer to reaching neutral levels. The yield on the benchmark 10-year Treasury note finished the day at 3.06%, its lowest since early October, while the 2-year note yield ended at 2.80%. Meanwhile, equities worldwide ended the week in the red, as political woes in Europe spooked investors away from high-yielding assets. The Japanese macroeconomic calendar will be a bit busier these days, starting with the release of the October Trade Balance at the beginning of the week, and a speech from BOJ's Kuroda.
The pair closed below the 113.00 level and is technically poised to extend its decline, despite not yet in a bearish market. The daily chart shows that technical indicators turned south, maintaining strong downward vertical slopes, the Momentum still above its mid-line but the RSI already at 46. In the same chart, the 100 DMA maintains a mild bullish slope, currently at 112.00, providing a strong dynamic support that if broken, will anticipate a steeper decline. In the 4 hours chart, the bearish case is stronger, as the pair finished below all of its moving averages, while technical indicators stand at fresh monthly lows, the Momentum extending its decline and the RSI partially losing its downward strength at around 30. The immediate support is 112.60, a strong static level and where the pair bottomed Friday.
Support levels: 112.60 112.25 112.00
Resistance levels: 113.00 113.45 113.80
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