USD/JPY: bulls on a knife's edge, balancing on vulnerable trend line support

USD/JPY is currently trading at 111.34 and is looking to stabilise on the 111 handle this Tokyo session, fending off the pressures from the 111.50's and overnight highs while otherwise, risk to 111.20 and the Europen lows opens the downside up against a vulnerable ascending support line formed back in March 2018 that, to date, has kept the bullish tend intact. 

USD/JPY was better bid in the North American session after a risk-off market in European trade. The pair held in a tight 37 pip range above Friday's 111.11 low. US yields were subdued and that gives the outlook somewhat uncertain. Also, the political headlines are likely to the pair subdued this week, probably until US CPI hits the screens on Friday - (The DXY was trading between the day's range of 95.1990-95.5150 where the high being made in the latter part of the European session).

US yields and China keeping the pair subdued

As for Yields, the US 10yr treasury yields moved beyond the previous day’s decline, from 2.96% to 2.94% and the 2yr yields ranged sideways between 2.64% and 2.66%. The Fed fund futures yields were pricing in almost two more full hikes in 2018.

China, on Friday, threatened to place tariffs on $60 billion of American goods if the White House went ahead and imposed the new proposed levies on Chinese products. Indeed, in an article read in China’s Global Times newspaper, the author wrote that Beijing is ready to dig in for a “protracted war” with the U.S. over trade. However, US stocks were more positive than over in European trade.

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that, technically, the pair is short-term neutral:

"In the 4 hours chart, it remains confined between its 100 and 200 SMA, both lacking directional strength, while technical indicators turned flat around their midlines. The immediate resistance now is the 111.60 region, the 38.2% retracement of the 113.17/110.58 decline,  with a recovery above the level leaning the scale toward the upside for the upcoming sessions."