USD/JPY: looking for a break of 106.50 but 106.20 first hurdle

USD/JPY is testing the boundaries once again in the Tokyo open after a series of data was released for Japan. Currently, USD/JPY is trading at 106.17, up 0.09% on the day, having posted a daily high at 106.22 and low at 106.02.

Japan Q4 GDP revised up to 1.6 pct annualised growth on stronger capex

USD/JPY has been recovering from the depths of the 105.40's that were scored on the Cohn headlines, with the price struggling initially in the 105.80 on two attempts met with aggressive opposition in London before a break out to test 106.00 before that gave way to 106.20 to string resistance, piercing the descending trendline resistance momentarily, showing the bull's intentions. 

How did yields perform?

As for yields, the US 10yr treasury yield, which fell 4bp to 2.84% in response to the Cohn resignation and assorted trade tensions, chopped back to 2.88% in the NY afternoon, as explained by analysts at Westpac while 2yr yields remained locked inside a 2.22%-2.26% range the analysts added. "The Fed's Beige Book of regional anecdotes showed increased upward pressure on wages in recent weeks. Fed fund futures continued to price three more hikes by end-2018 (with March highly likely), and another in 2019."

BoJ next risk

Analysts at Rabobank offered a full preview as follows:

"Bank of Japan (BoJ) will hold its monetary policy meeting on 8 and 9 March. We still BoJ Governor Haruhiko Kuroda to maintain QQE, despite other major central banks’ eyeing an exit of ultra-loose monetary policy. As we highlighted in our recent Monthly Outlook, Kuroda’s recent re-appointment as BoJGovernor along with his dovish new deputies Masayoshi Amamiya and Masazumi Wakatabe signals a vote of confidence for Kuroda and his policies. In addition, inflation in Japan (0.9% y-o-y in January) is still far below BoJ’s target rate of 2% and will likely remain below target for the foreseeable future, especially if market turmoil induces safe have demand for the Yen. Finally, Kuroda has elaborated on his previous remarks that BoJ will start thinking about how to exit QQE around 2019 Namely, Kuroda stated that “I said that we would be discussing how to move forward with exit. I never said we would be exiting immediately in fiscal 2019”.

USD/JPY levels

Only a break of the 106.51 daily Tenkan will open risk towards the 107 handle. Thereafter, 107.80/90 is on the wide ahead of 108.00 before 110.85. 111.44/50 is next in the picture as being a double Fibonacci retracement that is lining up with a lower and descending 200-D SMA at 111.30. A break of the 105 handle opens up space on the charts with little support on the way down 100.70/99.00 on the charts.