Currently, USD/JPY is trading at 112.46, down -0.09% on the day, having posted a daily high at 112.61 and low at 112.44.
USD/JPY is offered in the Tokyo open with Asian markets also mixed following the lead from Wall Street. The nikkei is back from a day out and is underperforming while the yen strengthens as a result. The yen has hit a fresh high for the month despite there being a lack of catalysts.
We will have to wait for further Fed speak along with this week’s domestic risk for Japan that is limited to Wednesday’s trade data (Tuesday PM EST) and the release of the BoJ minutes from the late January meeting. The yield spread was pressured with the US 10y dropping back below the 2.50% mark to 2.47% - a two-week low - while 2yr yields fell from 1.32% to 1.29%. However, Fed fund futures continue to price around a 60% chance of the next hike occurring in June and that should underpin the dollar in the broader scope of the market.
Valeria Bednarik offered her outlook for USD/JPY:
"From a technical point of view, the risk remains towards the downside, as the price held well below its 100 and 200 SMAs both still horizontal far above the current level in the 4 hours chart, whilst the RSI indicator holds flat at oversold levels and the Momentum hovers back and forth below its 100 line. A downward acceleration below 112.50 should see the pair nearing the 112.00 level, where the pair has the 38.2% retracement of its late 2016 monthly rally, with scope to extend afterwards towards the 111.60 region, where the pair bottomed multiple times this year."