USD/JPY clocks 2-week high of 113.19 as T-yields rise on the US tax reform news

Omkar Godbole FXStreet Contributor

The bid tone around the greenback strengthened, pushing the USD/JPY pair to a two-week high of 113.19 after news hit the wires that the US Senate has adopted a budget resolution, setting stage for Republican tax reform effort.

The market has welcomed the first step towards tax reform. The yield on the 10-year Treasury note is up 2 basis points. The 30-year has added 2.85 basis points. Meanwhile, the 2-year yield remains flat lined. Thus, yield curve has steepened to 79 basis points. A steeper yield curve is USD positive and vice versa.

The tax reform story is likely to keep the US stocks well bid on the last trading day of the week. Thus, JPY (being a funding currency) is likely to remain on weaker footing.

As far as Sunday's Japanese elections are concerned, the odds of a surprise (Kibo no To victory) are low. Nevertheless, caution is advised as JPY tends to strengthen on Friday on fears the tensions in Korean Peninsula might escalate over the weekend.

USD/JPY Technical Outlook

Jim Langlands from FXCharts writes, " On the topside, 113.20 would be decent resistance. Above there, unlikely today, 113.43 (6 Oct high), 114.00 and 114.49 (11 July high) would eventually beckon. The dailies rather uncertain of any potential upside momentum, and on the downside, support today should arrive at the session low at around 112.30, below which, the 18 Oct low was at 112.12. Back below 112.00, good support would be at 111.60/70. Buying dips is still preferred near 112.10/30 although further out, with the dailies looking less positive, further range trade near current levels may be in store."

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Overbought	High
1H	Bearish	Overbought	Low
4H	Bearish	Neutral	Shrinking
1D	Bearish	Neutral	Shrinking
1W	Bearish	Neutral	High
Updated Oct 20, 01:45 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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