USD/JPY analysis: bullish, but yields cap the rally

Valeria Bednarik FXStreet

USD/JPY Current price: 110.66

Japanese May trade balance, expected to post a deficit of ¥235B.
US Treasury yields tumbled post-ECB's decision to keep rates at record lows.

Solid US data and a hawkish Fed resulted in the USD/JPY pair closing Friday at 110.66, its highest settlement in over three weeks. The rally, however, stalled short of May's high of 111.39, as US Treasury yields plunged following ECB's monetary policy announcement, as the central bank said that rates will stay low at least through 2019 summer. The yield on the benchmark 10-year Treasury note closed the week at 2.92% after flirting with 3.0% post-Fed. Another factor capping the rally was the poor performance of equities amid escalating tensions between the US and China. The week with start with the release of the Japanese May trade balance, expected to post a deficit of ¥235B after April surplus was revised to ¥625B. From a technical point of view, the pair heads into the weekly opening with a bullish stance, as it advanced above the 61.8% retracement of its latest daily slump at 110.15, also holding above its 100 and 200 DMA that anyway continue to lack directional strength, signaling the absence of a clear longer-term trend. Technical indicators in the mentioned chart have neared overbought readings, partially losing their bullish strength ahead of the weekly close. According to the 4 hours chart and for the shorter term, the upside is also favored as the pair settled above its 100 and 200 SMA, the Momentum indicator resumed its advance after testing its 100 level, while the RSI indicator maintains its bullish slope around 60.

Support levels: 110.40 110.15 109.70

Resistance levels: 110.85 111.20 111.45

View Live Chart for the USD/JPY

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

Crypto’s $638 million buyback boom may not be as bullish as it looks

Decentralized Finance (DeFi) protocols reportedly spent $638 million to buy back their native tokens in August, up 17% from a year earlier. On the surface, the buyback trend suggests the cryptocurrency industry is maturing fast, adopting one of Wall Street’s oldest tools to bolster valuations and distribute revenue. The headline becomes less impressive once the number is opened up.

Why hawkish Bank of Japan expectations aren't enough to sustain the Japanese Yen rally

The Japanese Yen (JPY) experienced a sudden burst higher after falling back below the 160.00 psychological mark against the US Dollar (USD) earlier this week amid a more hawkish repricing of Bank of Japan (BoJ) rate hike expectations.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.