USD/JPY: bulls looking for a break to 109.32?

By Ross J Burland
  • USD/JPY: bulls trigger the buy stops and the pair takes off.
  • USD/JPY: where next, 110 on the cards after 109.32 cleared?

USD/JPY overcame 108.00 option barriers and triggered buy stops above on Monday in European trade. Currently, USD/JPY is trading at 108.66, up 0.93% on the day, having posted a daily high at 108.73 and low at 107.66.

Higher US yields,  month-end approaching, (importers are piling in), and despite lower stock prices, there is a limit to the downside in the benchmarks, (falling risk aversion supportive as well),  the yen is testing fresh lows at levels last seen in mid-February. 

USD/JPY has been extending its range to the upside for several sessions and risk is now open to the 110 handle with the US 10-yrs looking in at a break on the 3% handle.

Other key news for USD/JPY traders

"Widening interest rate differentials remain a key headwind for JPY and the 10Y U.S.-Japan spread has extended to a fresh 10 year high above 290bpts. Comments from BoJ Gov. Kuroda have highlighted the need to maintain ‘strong’ accommodation, offsetting domestic political developments. PM Abe’s support has fallen to fresh lows, threatening the future of his Abenomics policy agenda," analysts at Scotiabank explained.

USD/JPY levels

Analysts at Commerzbank argue that the 50% retracement at 108.98 and the top of the cloud at 109.32 are levels that are next in the line of fire. "Dips lower will find initial support at the 106.83 55 day ma and the 105.66 current April low. Where are we wrong? Below the March low at 104.56 would introduce scope to 103.22, then 100.69 (Fibonacci retracements). This is not favoured," the analysts added.

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