• USD/JPY: bulls break and stay above the previous Tenkan, bullish technicals.
  • USD/JPY: yield spreads remain a critical headwind for the yen.

USD/JPY has popped the resistance of 109.30/40 and did so overnight in Tokyo, climbing to as high as 109.63 by the close of the opening hour. There was a little pullback to 109.43 where bulls stepped in again pushing the pair up to 109.80 for European traders to take over the baton. Currently, USD/JPY is trading at 109.74, up 0.57% on the day, having posted a daily high at 109.85 and low at 109.00.

The move in USD/JPY was technical, but the fundamentals are stacked up when considering that yield spreads remain a critical headwind for the yen, and there are fresh decade wides in the 2Y U.S.-Japan spread as the 10Y pushes back toward its recent highs. The 10's hit 3.01% again today before falling back to 2.99% currently. Today, DXY is sat around the open of 93.04 trading within a range of between 92.8410-93.4160. Risk reversals are shifting in a bearish manner for the yen and EURJPY has rallied back above the psychologically important 130 level - (130.49 the high so far). 

Key events ahead

  • Atlanta Federal Reserve Bank President Raphael Bostic to speak at the World Affairs Council in Jacksonville, Florida at 17:15 GMT.
  • Consumer price inflation due on Thursday.

USD/JPY levels

Technicals lean bullish with RSI on the way to 70 and momentum picking up on the dailies as well. The 200-DMA and 61.8% at 110.18 are eyed through 110.03 1st May high.  Bulls can then look for a break of the 61.8% of the Nov-Mar drop & Nov low at 110.85. This will open up risk towards the 112 handle. To the downside, attention would be towards a break below the 108.50 level. This will open risk towards the 50-D SMA (107.15) before the 2018 low at 104.63 as a key support. 104.20 gives way to a downside measured target of 102.58, guarding a run to 101.19/99.00 as the June-to-November 2016 lows ahead of 100.70/99.00.

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