USD/JPY analysis: scope to extend towards 114.40

Valeria Bednarik FXStreet

USD/JPY Current price: 113.51

The USD/JPY pair closed the week at 113.51, its highest since early July amid rallying US equities and US Treasury yields after the Senate passed a budget bill which fueled hopes a tax reform in the country is around the corner. Wall Street trades at record highs on speculation the new US administration will cut the corporate tax rate. US Treasury yields, the main motor for the USD/JPY closed the week at 2.38%, up from 2.32% the previous day, and a multi-week high. Also, affecting the yen is this Sunday snap election, called by PM Shinzo Abe, as a result of the rising threat from North Korea, although many believe that he took this as an excuse to recover popular approval, as after reshuffling its cabinet, approval rating for the current PM fell to record lows last summer. The general belief is that Abe will win another term, resulting in a limited market's reaction as no change in monetary policy could then be expected. The pair seems poised to extend its advance according to technical readings in the daily chart, although momentum is still scarce. The chart shows that the price settled well above its 100 and 200 DMAs which stand horizontal and within a tight range around 111.20/40, as technical indicators head north, the Momentum within neutral territory, but the RSI currently at 63. Shorter term, and according to the 4 hours chart, the downward potential is well limited as the price develops well above its 100 and 200 SMAs, but further gains are still unclear, as indicators lost bullish strength, holding anyway within positive territory. An upward acceleration through 113.60, however, could lead to a test of the major resistance area around 114.40, where the pair topped in May and July.

Support levels: 113.10 112.60 112.20

Resistance levels: 113.60 114.00 114.40

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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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