The Dollar-Yen pair 111.69 in the NY session before recovering in Asian session to 112.14, tracking the rebound in the 10-year treasury yield from its 50-DMA support. The rebound could be short lived as the spread or the difference between the US 10-year treasury yield and the Japanese 10-year government bond yield fell below 50-DMA on Tuesday.
US-Japan 10-year yield spread
The yield spread may narrow further in favor of the Japanese Yen if the US housing starts and building permits number disappoints expectations.
Technicals
Resistance
- 112.32 (38.2% Fib R of 108.80-114.49 + 1-hour 50-MA)
- 112.40-113.47 (falling channel resistance on 4-hour chart)
- 112.67 (1-hour 100-MA sloping downwards)
- 112.87 (July 17 high on 4-hour chart)
Support
- 111.80 (50-DMA), 111.77 (100-DMA), 111.74 (200-DMA)
- 111.65 (50% Fib R of 108.80-114.49)
- 111.35 (falling channel support on 4-hour chart)
- 111.00 (psychological figure)
4-hour chart
-636360345499593003.png)
Observations
- Falling tops formation
- RSI still not oversold, suggests room for further losses in the pair
- 50-MA, 100-MA topped out, bearish crossover likely
Daily chart
-636360345733342120.png)
Observations
- RSI has turned bearish
- Potential bearish crossover between 50-MA & 100-MA, 50-MA & 200-MA
Comments
- The spot looks set to re-test previous day’s lows around 111.65 and possibly breach the support zone around 111.70 on an end of the day closing basis in favor of 110.90. (110.98 is 61.8% Fib R of 108.80-114.49 and 110.93 is 161.8% Fib ext of 114.49-112.86-113.58).
- Only a bullish break of the falling channel would signal bearish invalidation, although on a larger scheme of things, the outlook remains bearish as long as the US-Japan 10-year yield spread remains below the 200-DMA level of 2.3%.
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