USD/JPY analysis: soaring US yields failed to send the pair back to bullish territory

Valeria Bednarik FXStreet

USD/JPY Current price: 113.04

US Treasury yields jumped to fresh multi-year highs but ended up settling below Friday's close.
Japan to release Machinery Orders and Machine Tool Order figures during the upcoming Asian session.

The USD/JPY pair hovered around the 113.00 level, moving alongside US Treasury yields. The pair peaked at 113.38 overnight as the yield for the benchmark 10-year Treasury note hit 3.259% a new multi-year high, later retreating to settle around 3.21% and dragging the pair lower. Japan released its August trade balance which printed a wider-than-expected deficit of ¥-219.3B surpassing the forecasted ¥-208.0B and the previous ¥-1.0B, amid a large increase in imports coming from the US, up 21.5% in the month. Exports to the American country were up by 5.3%. Japan is Trump's next target in his battle against US trade partners, and talks are scheduled to take place later this month. Looking forward, Japan will release Machinery Orders and Machine Tool Order figures during the upcoming Asian session. The US will unveil September PPI figures, seen modestly up after August decline.

The bullish case has been erased further as, despite the strong momentum in yields, the pair remained well below the 114.00 threshold. The pair has spent the day hovering around a mild bullish 100 SMA in its 4 hours chart, losing ground below it in the American afternoon and as technical indicators resume their declines well into negative territory following a correction of oversold conditions, in line with further declines, particularly on a break below Monday's low at 112.81, with scope then to extend its decline down to 112.00/20.

Support levels: 112.80 112.50 112.20

Resistance levels: 113.40 113.75 114.10

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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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