USD/JPY Forecast: Ignores spike in super long JGB yields, bullish DMI crossover

Omkar Godbole FXStreet Contributor

The Dollar-Yen pair found support at 112.62 (descending trend line) on Friday and edged higher to 113.13 levels in dull trading on Monday. The spot has extended gains in the Asian session today to 113.66 levels.

Super long JGB yields spike

The 30-year Japanese government bond (JGB) yield rose from 0.856% (Feb 13 low) to one-year high of 0.925% today. On similar lines, the 40-year yield has rallied from 1.008% to 1.082%. Moreover, markets believe the Bank of Japan (BOJ) would tolerate the rise in the super long JGBs.

Meanwhile, the benchmark 10-year yield has remained flat between 0.088% to 0.10% level over the same period.

Historical data suggest the Yen closely follows the 10-year yield rather than the super long JGB yields. This explains the rise in the USD/JPY in the face of the super long JGB yields.

In the US, the treasury yields continue to remain resilient in anticipation of a fiscal spending plan. However, the weekly chart of the 10-year treasury yield shows repeated failure to close the week above 2.5%. Last week’s candle was a Gravestone Doji, which suggests potential for a strong pullback. Hence, Dollar bulls need to be cautious as long as the spot is below the 50-DMA level of 114.93.

Technicals - Bullish above 50-DMA

Daily chart

The rebound from the descending trend line support on Friday if followed by a daily close above 50-DMA of 114.93 would add credence to the bullish DMI crossover and open doors for a rally to 118.66 (Dec 15 high).
The ADX is sloping downwards, suggesting a weak momentum. Thus, there is need to be cautious so long as the spot is below 50-DMA.
On the lower side, breach of the session low of 113.11 could yield a pull back to trend line support around 112.34. Note that such a move would lead to another failure on the part of the RSI to break above 50.00 levels.

AUD/USD Forecast: Bearish rising wedge breakout likely

Daily chart

Bearish price RSI divergence on the daily chart coupled with a failure to see a weekly close of 0.77 points to increased likelihood of a bearish break from the rising wedge formation. Such a move would open doors for a strong pull back to 0.76 – 0.75 (200-DMA) levels.
On the higher side, only a weekly close above 0.77 handle would shift risk in favor of a rally to 2016 high of 0.7835.

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 off highs, back to around 1.1900

EUR/USD keeps its strong bid bias in place despite recedeing to the 1.1900 zone following earlier peaks north of 1.1900 the figure on Monday. The US Dollar remains under pressure, as traders stay on the sidelines ahead of Wednesday’s key January jobs report, leaving the pair room to extend its upward trend for now.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold picks up pace, retargets $5,100

Gold gathers fresh steam, challenging daily highs en route to the $5,100 mark per troy ounce in the latter part of Monday’s session. The precious metal finds support from fresh signs of continued buying by the PBoC, while expectations that the Fed could lean more dovish also collaborate with the uptick.

Crypto Today: Bitcoin steadies around $70,000, Ethereum and XRP remain under pressure

Bitcoin hovers around $70,000, up near 15% from last week's low of $60,000 despite low retail demand. Ethereum delicately holds $2,000 support as weak technicals weigh amid declining futures Open Interest. XRP seeks support above $1.40 after facing rejection at $1.54 during the previous week's sharp rebound.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.