USD/JPY analysis: retreating from key resistance, but comfortable above 110.00

USD/JPY Current price: 110.12

  • Japanese GDP contracted in the first quarter of the year according to preliminary estimates.
  • USD/JPY traders still looking at US Treasury yields for direction.

The USD/JPY pair retreated from its high of 110.45, just 2 pips below the high post last February, but trades comfortable above the 110.00 level, as US Treasury yields remain near the multi-year highs reached Tuesday. Hurting the yen was worst-than-expected Japanese GDP, as the Q1 estimate printed -0.2% while the annualized reading came in at -0.6%. The economic contraction is surely bad news for the BOJ, as it means intervention for longer. On a brighter note, Industrial Production picked up in March, advancing 1.4% MoM and 2.4% YoY. In the US, mixed housing data weighed on the pair, as Treasury yields also ticked marginally lower afterward.

The pair is technically bullish, but the short-term picture suggests it may correct lower, particularly if it breaks below the key 110.00 figure, as technical indicators in the 4 hours chart retreat from extreme overbought readings, yet with the pair firmly above bullish moving averages, any possible decline should be limited. The 110.45 region is a key resistance and a break above it should result in a continued rally up to the 111.20/60 price zone.

Support levels: 110.00 109.60 109.25  

Resistance levels: 110.45 110.90 111.20

View Live Chart for the USD/JPY

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