USD/JPY prints fresh highs in Tokyo through 110.50 but lacks follow through

The US dollar has made a series of daily gains as markets move sideways with a lack of impetus as we await US CPI and retail sales this week and some potential perspective on the US economy from various Fed speakers this week. 

In the meantime, the US 10yr treasury yield climbed from 2.63% to 2.66%, while 2yr yields rose from 2.46% to 2.49% and offer a relatively good return on short term bills compared to elsewhere, hence the dollar remains bid. However, the futures markets still price little chance of any further Fed rate hikes in this cycle, with a 15% chance of a cut by December. The Fed is data dependent and should we continue to see growth in the jobs market and wage inflation, the Fed is likely to come back into vogue and rate rises should support the dollar.  

Elsewhere, we will wait to see how various geopolitical matters play out with US/China trade talks underway again in Beijing this week, PM May to grace The Commons with a statement on Brexit and the mess in Washington with a potential partial shutdown again.

USD/JPY levels

Valeria Bednarik, the Chief Analyst at FXStreet, explained that the pair reached a strong static resistance without retreating much after the first test of the area, a sign that bulls are in control of the pair:

"The 4hours chart shows that the RSI entered overbought territory, rather a result of the previous range trading than of a strong upward momentum, as the pair is measly 30 pips above its previous monthly high. Still, the pair is also above its 100 and 200 SMA which lack directional strength above a major Fibonacci support at 109.05, all of which maintains the risk skewed to the upside, with room for an extension up to the 111.40 price zone."