USD/JPY pierced the support of 112.32 (38.2% Fib R of 108.80-114.49) to hit a two-week low of 112.16 after the news of the US Trumpcare debacle triggered concerns of a delay in tax reforms.
The spot clocked a high of 112.68 earlier today before taking a hit on broad based USD selling. A downside break of the tight trading range of 112.30-113.00 has been confirmed on the 1-hour chart. Thus, more losses cannot be ruled out.
However, treasury yields are still flat lined
There is no action in the treasuries even though the failure of Trumpcare means reduced odds of tax reforms. The 10-year US treasury yield remains flat lined round 2.3%. This may be because the bond markets have already priced-in the ‘failure of Trumpflation’.
The yields are already at pre-US election levels. Nevertheless, the resilience in the treasury yields warrants caution. Another wave of selling at the London open cannot be ruled out.
USD/JPY Technical Levels
The spot was last seen trading around 112.22 levels. The daily RSI has breached 50.00 levels to the downside, while MACD shows the bearish move is gathering pace. A nice falling channel set up is seen on the 4-hour chart.
A break below 112.00 (psychological level) would expose 111.72 (4-hour 200-MA + June 29 low + falling channel support + 111.70 - 200-DMA), under which a major support is directly seen at 111.14 (June 216 low). On the higher side, 112.32 (38.2% Fib R of 108.80-114.49) is likely to offer resistance ahead of 112.71 (1-hour 5-MA) and 112.87 (resistance on 1-hour chart).
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