USD/JPY: bears chased in below 111 the handle, bulls by the dip, eye 113 handle on Fed divergence
|- The BOJ board disagreed on new tolerance for yield moves which triggered a sell-off in USD/JPY.
- USD/JPY has been stabilising in NY trade at the 50-D SMA having made a high of 111.44.
- US yields remain firm in the 10-yrs at 2.97%between the day's range of 2.96-2.98% while the Fed funds future continue to price in around two more Fed hikes for the year.
- However, should the uptrend above the 110.63 55-DMA give way, there could be a subsequent test down to the 108.87 Kijun.
USD/JPY has been stabilising in NY trade at the 50-D SMA having made a high of 111.44 and a low of 110.83, although significantly, the pair broke below the 111 handle and rising trend line support for the first time this month and of which it has only broken below the trend line support on three occasions since it formed back on the 25th March.
USD/JPY has taken up the role of its safe-haven status when rallies have failed to break out of the rising channel's resistance at 111.39 and 113.72. However, on this occasion, the pair is offered as the dollar keeps losing its way on its northerly trajectory on the 95 handle in the DXY while the Chinese Yuan stabilises. However, there was some chatter in the European session where the moves were made, after a morbid Asian shift, that the BOJ board disagreed on new tolerance for yield moves which triggered a sell-off in USD/JPY and despite a better bid dollar elsewhere.
DXY still bullish while above 94.80
However, there was a pick up from the lows to 111.19 before another slide where the culprit was a decline in the DXY from the 95.20's down below 95.10. However, a close below the rising 94.80 21 DMA is needed to end the topside bias and US yields remain firm in the 10-yrs at 2.97%between the day's range of 2.96-2.98% while the Fed funds future continue to price in around two more Fed hikes for the year.
USD/JPY levels
The 111.19 Tenkan was breached again and a play below the 111 handle spells near-term danger tot he bulls, especially if bears can close below the rising trendline support. So far, bears have cashed in below the 111 handle, where bulls have been buying the dip again. However, should the uptrend above the 110.63 55-DMA give way, there could be a subsequent test down to the 108.87 Kijun. The 113.20-30 key resistance is a key target, but bulls need a close above 111.88, (100 4hr-SMA at 111.66), and then above the 61.8% of late July dive at 112.19 for the 113.18 peak and the 200-WMA / 61.8% of 2016-18 drop at 113.27/29.
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