• Resurgent US bond yields provided a minor lift in the last hour.
• Further gains likely to remain capped amid risk-off mood.
The USD/JPY pair reversed an early Asian session dip to the 110.00 neighborhood and spiked to near 4-month tops in the last hour.
Following Tuesday's convincing move beyond the very important 200-day SMA, the pair was seen consolidating in a range above the key 110.00 psychological mark. Meanwhile, a sudden pickup in the US Treasury bond yields, which although has failed to provide any meaningful boost to the US Dollar, helped the pair to finally break out of its consolidative range and build on its recent bullish momentum.
Currently holding with gains just above mid-110.00s, further gains, however, are likely to remain capped amid the prevalent negative trading sentiment around equity markets. This coupled with some renewed geopolitical tensions in the Korean peninsula might underpin the Japanese Yen's safe-haven demand and further contribute towards keeping a lid on any strong up-move.
Hence, it would be prudent to wait for a strong follow-through buying interest before positioning for additional near-term appreciating move in the near-term.
Moving ahead, a relatively thin US economic docket, featuring the release of usual initial weekly jobless claims and Philly Fed Manufacturing Survey, might provide some fresh impetus later during the early NA session.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet writes, “the pair may attack resistance at 111.25 - trendline sloping downwards from August 2015 high and December 2015 high.”
“A close below the 10-day MA would abort the bullish view, while acceptance below 108.65 (May 4 low) would signal a bullish-to-bearish trend change,” he further added.
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