USD/JPY analysis: extends rebound as US yields rise
|USD/JPY Current Price: 1.2691
The Japanese yen was among the worst performers on Wednesday. An improvement in risk sentiment and a decline in US bonds weakened the currency significantly. Still, the slide was limited ahead of a key event for risk sentiment: the G20 meeting. Rate cuts from the Federal Reserve are expected but not as aggressively as yesterday. Comments from Bullard and Powell tampered expectations and triggered a rebound in US yields. The 10-year rose from below 2% to 2.05% supporting the rally in USD/JPY. The pair had the best performance in two months and closed far from the 107.20 area for the first time in five days. During the Asian session, retail sales data will be released in Japan, while in the US, market participants are likely to focus on the Q1 GDP revision.
Technically, USD/JPY run into an active resistance area at 107.80/90 that capped the upside. Ahead of the Asian session, some consolidation and a pullback could take place considering that the gains seen on Wednesday were the biggest in months. The 107.50 zone is the immediate support, and far below comes 107.05. Below the last one, the bearish pressure will likely intensify. The 4-hour chart shows the pair with a clear bullish bias in line with technical indicators. A breakout above 107.80 could boost the greenback back above 108.00, targeting 108.30.
Support levels: 107.00 106.75 106.50
Resistance levels: 107.90 108.40 108.70
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