USD/JPY Forecast: Weak US personal spending could yield break below 110.00

The US personal income and spending report will be released today. Analysts expect nominal consumer spending to rise 0.4% in April.

A strong rebound in the personal spending will add credence to the Fed’s view that the Q1 slowdown was transitory. Expect a rise in the treasury yields and the US dollar if the personal spending beats estimates.

The Japanese Yen could strengthen in Europe if the Greek-German bond yield spread widens in response to the resurgence of the Greek issue.

Technicals - Eyes 110.00 levels

Daily chart

Pair’s failure around 112.00 levels last week, followed by a break below 111.00 levels has established a falling top formation on the daily chart.
The RSI has failed to get back above 50.00 (into bullish territory) and is now sloping downwards.
The pair thus appears on track to test 110.23 (May 18 low) and 110.00 levels.
A daily close below 110.00 would establish a falling bottom formation and shall open doors for a sell-off to 108.13 (Apr 17 low).
On the higher side, only a daily close above 111.85 (falling channel resistance) would signal bearish invalidation.

Note: The 10-year treasury yield currently trades around 2.24% after having failed earlier this month to hold above 2.3% (double top neckline). A weak US personal spending report could push the yield below key support of 2.165%. Such a move would open doors for sell-off to 2.0%. The USD/JPY could follow suit and break below 110.00 levels.

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