Resistance: 110.45 (trend line hurdle), 110.62 (23.6% fib of 118.66-108.13), 111.58 (Apr 10 high), 111.86 (50-DMA)
Support: 109.59 (session high), 109.38 (5-DMA), 109.09 (10-DMA), 108.81 (200-DMA)
USD/JPY - Falling channel is intact, RSI at a neutral level
Daily chart
- Monday’s failure at the falling channel resistance followed by a drop to 109.66 levels suggests the corrective rally from the low of 108.13 may have run out of steam, although the support at a 5-DMA level of 109.39 could hold.
- The daily RSI is at 50.00 levels and awaits breach of the falling trend line, while the daily MACD has confirmed bullish crossover.
- A daily close above 110.45 would push RSI above the descending trend line; add credence to the bullish MACD and open doors for 111.58 levels.
On the downside, a daily close below support at 109.48 (support offered by the trend line drawn from Mar 14 high and Apr 10 high) could yield a re-test of 108.13 (Apr 17 low) levels.
Focus on US 10-year treasury yield
The 10-year yield failed to hold above 2.31% (double top neckline) on Monday. The double top neckline was breached to the downside last week, opening doors for a sell-off to 2.00%.
A daily close above 2.31% would signal bearish invalidation and open doors for a more sustained rally in the USD/JPY pair.
Note: There is a strong positive relationship between the 10-yr treasury yield and the USD/JPY pair.
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