USD/JPY clocked an intraday high/low of 111.88/111.20 on Tuesday before ending the day on a flat note at 111.59 levels. The retreat from the high of 111.88 to 111.59 marks failure at 111.75 - 61.8% fib retracement of the July high and September low.
Daily chart - Indecision
- Tuesday's Doji candle at the 61.8% Fib retracement signals indecision/bullish exhaustion.
- Stochastic [5,3,3] is overbought, while the 14-day RSI is bullish.
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- A pull back to 100-DMA level of 110.80 is likely to be short lived.
- A negative close today would confirm the bearish Doji reversal and would mean the rally from the low of 107.32 has topped out at the 61.8% Fib hurdle.
- Meanwhile, a positive close above the previous day's high of 111.18 would signal continuation of the rally from the low of 107.32 and shall open doors for 115.00 as discussed here.
US-Japan 10-yr yield spread eyes breakout
- The 10-year yield spread is chipping away the channel resistance of 220 basis points. A break higher would be USD bullish.
- Bullish scenario - An end of the day close above 111.88 in USD/JPY coupled with a upside break on the yield spread could yield a quick fire rally to 115.00 levels.
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