USD/JPY Forecast: Bullish but Doji on 10-year T-yield calls for caution

Omkar Godbole FXStreet Contributor

For USD/JPY, the path of least resistance is on the higher side, technical charts indicate, although signs of bullish exhaustion in the treasury yields are calling caution.

At press time, the USD/JPY pair is trading at 112.27, having clocked a two-month high of 112.45 yesterday.

The pullback is likely associated with the 10-year treasury yield's retreat from the four-month high of 3.09 percent to 3.06 percent but has not done any damage to the bullish technical setup.

Daily chart

Tuesday's bullish outside-day candle and a close above 112.15 (Aug, 1 high) bolstered the already bullish setup - higher lows along the 100-day moving average (MA), bull flag breakout and rising 5-day and 10-day MAs - and opened up upside towards 113.18 (July 19 high).

Technically speaking, a close below the rising (bullish) 10-day MA of 111.78 would abort the bullish view. As of writing, the pair is holding well above the 10-day MA and the former resistance-turned-support level of 112.15 (Aug. 1 high).

So, it seems safe to say that USD bulls are still in a hunt for yearly highs above 113.00. However, the short-term bullish outlook would be invalidated if the 10-year treasury yield drops below 3.04 percent today.

10-year treasury yield daily chart

The treasury yield created a doji candle yesterday, indicating indecision in the marketplace. When viewed against the backdrop of the rally from Aug. 24 low of 2.8 percent the doji candle implies bullish exhaustion.

A close below 3.04 percent today would confirm a bearish doji reversal and could yield a deeper correction, well below 3 percent, in which case, the USD/JPY could find acceptance below 111.83 (Aug. 29 high), invalidating the bullish outlook.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.