USD/JPY to see a topside break towards 113.25 and potentially 114.31 – DBS Bank

USD/JPY is closing in on 112.00 and stays within a touching distance of the 8-month high it reached at 112.08 on September 30. Further upside on USD/JPY is contingent on US 10Y yields cracking a 1.72% neckline; this would have the pair break a current channel pattern with price extensions looking at the 113.25-114.31 pane, Benjamin Wong, Strategist at DBS bank, reports.

Playing catch-up with rising US yields

“The outlook on the US 10-year yields is contingent on a terse break of the 1.72% mark. The outlook appears contingent on a plausible bullish inverse head-and-shoulders pattern being triggered if the neckline around 1.72% can be pierced – remember this pattern is yet to be triggered but has the scope to do so. In the interim, this backdrop does provide a binge of support for USD/JPY as US yields hold their own. 

“With recent USD/JPY strength, support within the channel is raised to 110.59-110.38. This also comes just ahead of the 109.05 key support which USD bears need to crack if they wish to assert control.”

“The moot question is whether USD/JPY can trigger a breakout above the channel’s 112.23 top. Should the breakout be successful, the breakout augurs a target sandwiched between two Fibonacci extensions contouring 113.25 and 114.31.”