USD/JPY Forecast: Spinning top and a bearish follow through, 10-yr T-yield failed at 2.5% again!
|USD/JPY dropped to a low of 113.07 on Thursday as the risk rally stalled in the US stock markets and the treasury yields backed off from the weekly highs. The spot closed at 113.20 levels and the 10-year Treasury yield fell from 2.499% to 2.456%.
A report released by the Labor Department on Thursday showed a slight increase in initial jobless claims in the week ended February 11th. The jobless claims inched up by 5K to 239K. Economists had expected a figure of 245K. The four-week moving average also crept up to 245,250, an increase of 500 from the previous week's revised average of 244,750.
Meanwhile, housing starts fell 2.6%, but the building permits jumped 4.6% in January to a rate of 1.29 million units, the highest level since November 2015.
The mixed batch of data did little to lift the US dollar. Moreover, the bid tone around the Japanese Yen strengthened on account of the drop in the European stocks and flat closing in the S&P 500 index.
10-year yield set for a weekly close below 2.5%
In four out of the last six weeks, the 10-year treasury yield printed weekly highs above 2.5%, but failed to close above the same. This week could end on a similar note. Repeated failure to take out 2.5% could yield a strong pull back next week, leading to sharp losses in the USD/JPY pair.
Technicals - Daily RSI fails again to hold above 50.00 levels
Daily chart
- Wednesday’s failure at the 50-DMA and spinning top candlestick formation followed by a bearish move on Thursday suggests the corrective rally from the Feb 6 low of 111.61 has ended at 114.96 (Feb 15 high).
- The pair could test the support offered by the descending trend line around 112.65 levels. A daily close below 112.65 would open doors for a re-test of the recent low of 111.61.
- Note - the RSI has failed again to hold above 50.00 levels. A weak price action today would keep RSI below 50.00 for the second day. That would add credence to the bearish price chart.
- The daily ADX line is sloping downwards again, which indicates the spot could trade sideways in the range of 112.65 and 113.74 today.
AUD/USD Forecast: Weak close today would signal short-term trend reversal
Daily chart
- Thursday’s daily close below 0.77 if followed by a weak move today would confirm a bearish price RSI divergence and open doors for a pull back to 0.7550-0.7510 levels.
- The ADX line appears to have topped out as well.
- Note - The last weekly close above 0.77 handle was in April 2016. Since then, the spot has repeatedly failed to end the week above 0.77. A close below 0.77 today would mark another failure on the weekly chart at 0.77 levels.
- The weekly RSI is above 50.00 and pointing upwards, which suggests the dips to 0.75 levels could be short lived.
- On the higher side, only a daily close above 0.7750 would signal the continuation of the rally from the Dec 23 low of 0.7160.
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