USD/JPY Analysis: nearing July’s high

USD/JPY Current price: 108.69

• Yields led the way higher, USD/JPY held despite yields retreated from highs.
• Japanese Tokyo inflation seen steady at 1.1% YoY in July.
• USD/JPY could extend its advance toward the 110.00 figure.

The USD/JPY pair has soared to 108.72, its highest in over two weeks, ending the American session a handful of pips below this last. The dollar firmed up following solid American data, and after the ECB’s monetary policy announcement, which rocked financial markets. Given that Draghi & Co. were less aggressive than anticipated, stocks’ buyers started unwinding longs, with US indexes diving to weekly lows. Government bond yields, on the other hand, recovered sharply, with German yields recovering from record lows and US ones reaching weekly highs. The yield on the 10-year Treasury note hit 2.10%, to finally settle at 2.07%.

In the data front, Japan released at the beginning of the day the June Corporate Service Price index, which rose by 0.7% YoY, much better than the 0.0% expected. Early Friday, the country will release July Tokyo inflation, seen steady at 1.1% YoY. The core reading, excluding volatile energy and food prices, is also seen unchanged, at 0.8%.

USD/JPY short-term technical outlook

The USD/JPY pair has broken above the 61.8% retracement of its July’s decline, with little in the way now toward the top of the month at 108.98. In the 4 hours chart, the pair has soared above a congestion of moving averages, which stand around the 50% retracement of the same decline around 108.10. The 20 SMA, however, is advancing above the larger ones. Technical indicators in the mentioned chart have settled at daily highs, with the RSI stabilizing in overbought territory. Beyond the 109.00 level, the pair could extend its advance toward the 110.00 figure.

Support levels: 108.40 108.00 107.65

Resistance levels: 109.00 109.35 109.80

View Live Chart for the USD/JPY