USD/JPY analysis: torn between dollar's weakness and soaring T-yields

Valeria Bednarik FXStreet

USD/JPY Current price: 110.90

Technically bearish, despite bouncing from a fresh 4-month low.
BOJ to meet on Tuesday, no changes to monetary policy expected.

The USD/JPY pair closed the week in the red at 110.90, torn between dollar's weakness and soaring US Treasury yields, which rose to their highest since September 2014. Yields have been rallying alongside with Wall Street, on hopes of steady economic growth and central banks moving away from easing policies. The 10-year note yield closed the week at 2.64% from the previous 2.61% and after reaching 2.66% intraday. This past week, the pair established a 4-month low of 110.19. US government shutdown will surely take its toll on the pair, ahead of BOJ's monetary policy meeting next Tuesday. The Japanese central bank is largely expected to maintain its policy unchanged, despite having reduced their bond-buying over the last few months. In the meantime, the daily chart shows that the pair is below its 100 and 200 DMAs, with the larger one offering a dynamic resistance around 111.75. Technical indicators in the mentioned chart turned lower within bearish territory after correcting oversold conditions, all of which keeps the risk lean towards the downside. Shorter term, and in the 4 hours chart, the price remains well below bearish 100 and 200 SMAs, while the Momentum indicator bounces from its mid-line as the RSI heads higher around 50, all of which limits chances of a decline, unless it breaks through 110.60, now the immediate support, heading then towards the 109.85 region a long-term static support area.

Support levels: 110.60 110.20 109.85

Resistance levels: 111.30 111.75 112.10

View Live Chart for the USD/JPY

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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