USD/JPY analysis: eyeing Fed's decision for direction

Valeria Bednarik FXStreet

USD/JPY Current price: 111.50

The USD/JPY pair closed its second consecutive week with gains, setting an April high of 111.77, but limited to the upside as falling US Treasury yields kept yen's losses in check. The yield on the 10-year Treasury note fell to 2.28% in the last day of the month, accumulating 11.4 basis points to the downside in April, the largest one month decline since last October. Also, a neutral BOJ, positive on growth, but downgrading its inflation forecast for the ongoing fiscal year, failed to motivate investors around the JPY, while tepid US growth and confidence figures released on Friday contained the upside. Not only US preliminary Q1 GDP came in at 0.7%, but also the Michigan consumer confidence index fell to 97 in April from 98 in March. Upcoming direction will likely depend on how the market reacts to the Fed's monetary policy outcome next Wednesday, with a bullish breakout expected in the case policymakers "confirm" a rate hike for next June. Technically, the daily chart shows that the price has settled above is 200 DMA, but also that the 100 DMA heads modestly lower around 112.70, the level to surpass to confirm a more sustainable recovery. In the same chart, the Momentum indicator heads sharply higher within positive territory, whilst the RSI indicator also advances around 59, all of which supports additional gains. In the 4 hours chart, the price is also above its moving averages that anyway maintain their bearish slopes, the RSI indicator hovers around 65, but the Momentum heads south around its 100 level, indicating diminishing buying interest around the pair.

Support levels: 110.95 110.60 110.20

Resistance levels: 111.75 112.10 112.45

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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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