USD/JPY: testing the neckline for space on 108 handle

USD/JPY started out on the offer following Wall Street's decline and a Nikkei that turned sour after the open today. USD/JPY is currently trading at 107.81 with a high of 107.89 and a low of 107.65.

USD/JPY had, however, been relatively robust on Friday despite the sell-off in equities. The pair managed to hold in positive territory while testing the neckline resistance around 107.80 and flipped bullish on broad-based dollar strength and higher yields.

US yields on the rise

The US 10yr treasury yield extended into Friday’s New York close, from 2.91% to 2.96%, slightly above the February 2018 high and the highest since Jan 2014. Meanwhile, the Fed fund futures yields continued to price the next rate hike in June around a 90% chance (Bloomberg calculations). 

USD/JPY levels

The range has been between 106.85-107.85 and a break through the 108 level could be challenging considering the yen's safe-haven status and performing only second to the dollar. 

However, Valeria Bednarik, chief analyst at FXStreet argued that according to the 4 hours chart, the pair presents a neutral-to-bullish stance, holding above moving averages that lack directional strength, as technical indicators hover inside the positive territory, but also without clear directional strength.

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Jim Langlands of FX Charts explained, that as before, the daily momentum indicators retain a mildly constructive bias and look as though they are building up for another move higher. "The weeklies are also turning up so sentiment does look to be improving for US$Jpy although the short term charts look neutral on Monday and a fairly neutral stance is again required, but technically, buying dips still seems to be the plan," Langlands added.