USD/JPY Forecast: Weak US personal spending could yield break below 110.00
|The US personal income and spending report will be released today. Analysts expect nominal consumer spending to rise 0.4% in April.
A strong rebound in the personal spending will add credence to the Fed’s view that the Q1 slowdown was transitory. Expect a rise in the treasury yields and the US dollar if the personal spending beats estimates.
The Japanese Yen could strengthen in Europe if the Greek-German bond yield spread widens in response to the resurgence of the Greek issue.
Technicals - Eyes 110.00 levels
Daily chart
- Pair’s failure around 112.00 levels last week, followed by a break below 111.00 levels has established a falling top formation on the daily chart.
- The RSI has failed to get back above 50.00 (into bullish territory) and is now sloping downwards.
- The pair thus appears on track to test 110.23 (May 18 low) and 110.00 levels.
- A daily close below 110.00 would establish a falling bottom formation and shall open doors for a sell-off to 108.13 (Apr 17 low).
- On the higher side, only a daily close above 111.85 (falling channel resistance) would signal bearish invalidation.
Note: The 10-year treasury yield currently trades around 2.24% after having failed earlier this month to hold above 2.3% (double top neckline). A weak US personal spending report could push the yield below key support of 2.165%. Such a move would open doors for sell-off to 2.0%. The USD/JPY could follow suit and break below 110.00 levels.
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