USD/JPY - Consolidating within a tight range, focus on treasury yields

The Dollar-Yen pair is consolidating within a tight range defined by the 4-hour 100-MA (currently at 112.87) and the support of 112.32 - 38.2% Fib R level of 108.80-114.495.  

The 10-year treasury yield clocked a high of 2.366% on Monday, thus helping the Dollar regain some poise. However, the resulting rally in the USD/JPY quickly ran out of steam at 112.87 levels (4-hour 100-MA then). Moreover, the 10-year yield fell back to 2.30% and also looks trapped in the range of 2.3% and 2.37%. 

Eyes import price index

US import price index figure is due at 12:30 GMT. Import prices are seen dropping 0.2% m/m in June, compared to a 0.3% drop in May. 

Last week, Federal Reserve chairwoman Janet Yellen expressed confidence that the strong labour market and rising prices of imported goods will ensure that a recent downturn in inflation is transitory. It’s all about inflation, thus a positive import price index figure could lift the Treasury yields, USD/JPY pair and vice versa. 

Analysts at Scotiabank believe, “"Market participants are likely to remain focused on BoJ policymakers’ efforts at yield curve control and will eye the central bank’s inflation outlook amid rumors of a markdown in the BoJ’s official forecast."

USD/JPY Technicals

FXStreet Chief Analyst Valeria Bednarik says, “The pair continues finding support around 112.30, the 38.2% retracement of the latest bullish run, and below the mentioned 200 DMA, with the scale lean towards the downside. In the 4 hours chart, the early advance was unable to surpass a still bullish 20 SMA, while technical indicators have retreated from their mid-lines, supporting a bearish extension on a break below the mentioned Fibonacci support and with scope then to test the 111.60 region.”

Jim Langlands from FX Charts takes note of the critical resistance/support levels - “On the downside, the dollar has found support at the Fibo level at 112.30, but a break of 112.25 could bring about a decline to 112.00 ahead of a possible test of 111.70, which should act as strong support if we get there. On the topside, the daily charts look as though they are topping out, but if we do see a bounce, then, once above the session high of 112.85 minor offers will arrive at various points (113.00/25) ahead of  14 July’s high at 113.57.”