USD/JPY analysis: bullish potential to increase beyond 110.50
|USD/JPY Current price: 110.17
- US Treasury yields soared, but stocks plunged, limiting the pair's rally.
- Dollar's soft tone to maintain the upside limited.
The USD/JPY pair regained the 110.00 level at the end of the week, benefiting from the solid US employment report and soaring yields, although the rally was limited by Wall Street, as US indexes experienced their largest weekly drop in almost two years, with investors fearing that a sharp advance in wages and inflation and therefore, a steeper pace of rate hikes, will offset the benefits of lower taxes. As for yields, the 10-year note benchmark settled at 2.85%, its highest in four years, while the 30-year note yield reached 3.10%, fueling concerns that higher borrowing costs could undermine the economic recovery. There won't be macroeconomic news coming from Japan until early Wednesday. The recovery seems corrective according to technical readings in the daily chart, as the pair´s advance has stalled at the 38.2% retracement of the decline between 113.38 and 108.27, at 110.25. In the mentioned chart, the pair is far below its 100 and 200 DMAs, while the Momentum indicator has lost its upward strength and turned back lower within negative territory as the RSI indicator holds around 47. Shorter term, the 4 hours chart shows that the pair settled a couple of pips above its 100 SMA, while technical indicators pulled back after reaching overbought readings. The pair would need now to surpass the 110.50 level to resume its advance, and maintain a positive tone through the upcoming sessions.
Support levels: 109.80 109.45 109.10
Resistance levels: 110.50 110.90 111.30
View Live Chart for the USD/JPY
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