USD/JPY bears lining up for a test below the 106 handle?

Currently, USD/JPY is trading at 106.13, up 0.03% on the day, having posted a daily high at 106.27 and low at 106.02. In the north America session today, the pair was faded hard from the session highs when the pair rallied on the back of a recovery in stocks. USD/JPY made a fresh 1.3 year low. The DXY ended -0.61% at the end of the day having traded between a range of 88.558 - 89.004, sending USD/JPY below the 61.8% of 2016 rally at 106.50 leaving eyes for the 105's.

In regards to the US 10yr treasury yields, they rose to the highest since Jan 2014 at 2.94% in European trade before sliding to 2.89% in NY. (Fed fund futures yields point to a rate hike in March while it looks questionable if the Fed will hike a further two or three times this year).

• Forex today: a busy and volatile day again, DXY to fresh 2.3 year lows

The VIX was through the 20 mark at one stage in the shift with volatility back in play. Stocks were lower and then they surged into the close, but they did not seem to help the bulls either. For the day ahead, thee markets look quiet at the end of the week with China out although we have some data left for the US session with Jan housing starts and Feb consumer sentiment from the University of Michigan.

Elsewhere, Japanese finance minister Taro Aso told parliament that the yen’s recent rise wasn’t worrying enough to warrant intervention and the markets are ok with that, obviously. So far, that has been little reaction in the markets to the news that Waseda University professor Masazumi Wakatabe will be joining the BoJ - (supports aggressive monetary easing).

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that despite the fresh 15 month lows, the pair is bearish: "Particularly as it is unable to recover above the 107.00 level. In the  4 hours chart, the pair continues developing well below its 100 and 200 SMAs, while technical indicators bounced from oversold readings, but remain well below their mid-lines. The pair needs to clearly break this 106.80 region to be able to extend its gains up to the 107.55 area first, en route to 107.90".