USD/JPY analysis: yields will keep on backing advances, but not for long

Valeria Bednarik FXStreet

USD/JPY Current price: 112.38

The USD/JPY pair closed with gains for a third consecutive week, despite broad dollar's weakness, finding support in surging US Treasury yields. Early Friday, Japan released its May inflation, with core CPI up 0.4% when compared to a year yearly, increasing for a fifth consecutive month, but still vastly below BOJ's 2% target, limiting possibilities of tapering in the Asian country. In the US, yields advanced for a fourth consecutive session, with a notable advance in shorter-term ones, as the 2-year note benchmark advanced 0.62% to 1.385%, while the 10-year note yield ended the week at 2.30%. Despite the immediate effect over the pair was positive, the US yield-curve kept flattening, reflecting investors' concerns over lagging US inflation, which long term, is dollar's negative. From a technical point of view, the daily chart for the pair maintains a bullish bias, as technical indicators advance above previous highs and near overbought levels, although the price was unable to settle above a bullish 200 SMA, currently at 112.60. A stronger resistance comes at 112.90, where the pair topped for the week and the 23.6% retracement of its latest bullish run. In the 4 hours chart, the 100 SMA has crossed above the 200 SMA, both in the 111.000 region, while technical indicators turned lower within positive territory, suggesting the pair may need to surpass the mentioned high to gain enough upward strength to extend its advance this Monday.

Support levels: 112.00 111.60 111.20

Resistance levels: 112.50 112.90 113.30

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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