USD/JPY analysis: bulls side-lined, more declines expected

Valeria Bednarik FXStreet

USD/JPY Current price: 111.42

USD/JPY plunged despite higher yields amid rising concerns of shrinking yield-curve.
Failure near yearly high hurt bulls' conviction, test of 110.00 becoming more likely.

The USD/JPY pair retreated further from the multi-month high of 113.17 and finished the week in the red at 111.42, amid broad dollar's weakness following comments from US President Trump. Comments from Fed's Bullard added to the pair's decline, as he said that the Fed should hold off on hiking further, as the shrinking yield curve is a bearish sign for the economy. The pair plunged despite rising US Treasury yields, with the 30-year note yield up to 3.03% and the 2-year note yield reaching 2.59%. Japan won't offer relevant macroeconomic data until next Tuesday when the country will release July preliminary Nikkei Manufacturing PMI and the final versions of the Leading and Coincident indexes for May. The pair settled at the 61.8% retracement of its latest daily advance between 110.34 and the mentioned 113.17, and is technically poised to extend its decline, as in the daily chart, technical indicators retreated from overbought readings, heading south almost vertically and nearing their midlines. The 100 DMA in the mentioned chart advances below the 200 DMA, both in the 109.50/60 region. In the 4 hours chart, the pair closed a few pips below the 100 SMA, the first time below it in almost a month, while technical indicators pared their declines in oversold territory, with the RSI still heading lower at 26, suggesting that buyers remain sidelined despite the latest 200 pips' slump.

Support levels: 111.10 110.70 110.30

Resistance levels: 111.80 112.10 112.40

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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.

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