USD/JPY analysis: bullish, but yields cap the rally
|USD/JPY Current price: 110.66
- Japanese May trade balance, expected to post a deficit of ¥235B.
- US Treasury yields tumbled post-ECB's decision to keep rates at record lows.
Solid US data and a hawkish Fed resulted in the USD/JPY pair closing Friday at 110.66, its highest settlement in over three weeks. The rally, however, stalled short of May's high of 111.39, as US Treasury yields plunged following ECB's monetary policy announcement, as the central bank said that rates will stay low at least through 2019 summer. The yield on the benchmark 10-year Treasury note closed the week at 2.92% after flirting with 3.0% post-Fed. Another factor capping the rally was the poor performance of equities amid escalating tensions between the US and China. The week with start with the release of the Japanese May trade balance, expected to post a deficit of ¥235B after April surplus was revised to ¥625B. From a technical point of view, the pair heads into the weekly opening with a bullish stance, as it advanced above the 61.8% retracement of its latest daily slump at 110.15, also holding above its 100 and 200 DMA that anyway continue to lack directional strength, signaling the absence of a clear longer-term trend. Technical indicators in the mentioned chart have neared overbought readings, partially losing their bullish strength ahead of the weekly close. According to the 4 hours chart and for the shorter term, the upside is also favored as the pair settled above its 100 and 200 SMA, the Momentum indicator resumed its advance after testing its 100 level, while the RSI indicator maintains its bullish slope around 60.
Support levels: 110.40 110.15 109.70
Resistance levels: 110.85 111.20 111.45
View Live Chart for the USD/JPY
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