USD/JPY Analysis: further gains depending on risk-related sentiment
|USD/JPY Current Price: 108.08
- The yield on the US 10-year Treasury note posted its largest weekly advance in near three years.
- Japan will start the week with a holiday, the US with an empty macroeconomic calendar.
- USD/JPY poised to extend its gains needs to break above 108.25.
The USD/JPY pair settled above the 108.00 level for the first time since late July, closing substantially higher for a third consecutive week. Demand for the safe-haven yen continued to be undermined by easing tensions between the US and China and hopes the UK will avoid a hard-landing. Optimism was clear better reflected by the bond market, as US Treasury yields were firmly up. The yield on the benchmark 10-year Treasury closed the week at 1.90%, its largest weekly rally since November 2016. On Friday, upbeat US Retail Sales helped build confidence in the US economy, moving away from a recession.
Japan is starting the week with a holiday, while the US has not data scheduled, anticipating a quiet Monday for the pair. Nevertheless, the central banks of both countries will have monetary policy meeting these days, with the Fed expected to announce a 25bps rate cut.
USD/JPY short-term technical outlook
The USD/JPY pair, in the daily chart, has reached a bearish 100 DMA, trading around it for the first time in four months. Technical indicators in the mentioned chart have eased just modestly from overbought readings, far from suggesting upward exhaustion. Furthermore, the pair has extended its advance above the 61.8% retracement of its August decline at 107.45. In the 4 hours chart, the pair remains above a bullish 20 SMA, which continues advancing beyond the larger ones. Technical indicators, however, are easing within positive ground, not enough to indicate a bearish divergence, but giving a warning sign. The key is the weekly high at 108.25, as an advance beyond it should lead to additional gains toward the August high as 109.31.
Support levels: 107.90 107.45 107.10
Resistance levels: 108.25 108.50 108.80
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