Rise remains capped below 114.50 amid firmer returns and risk aversion

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  • The USD / JPY blocks the rise in a climate of risk aversion, pending US data.
  • US Treasury yields retreat from highs, DXY remains broadly supported.
  • USD / JPY remains long despite a calm start to the week, with Fed sentiment leading the way.

After testing three-year highs of 114.46 early in Asia, USD / JPY consolidates above 114.00 as the bulls pause before resuming their bullish momentum.

The major ones closely follow the price movement of US Treasury yields, following the benchmark 10-year rates. The further rise in yields took the currency pair back to the multi-year highs reached on Friday.

However, 10-year rates appear to lack a bullish bias above 1.60%, limiting the USD / JPY’s efforts to refresh three-year highs.

The major decline remains dampened by the strengthening US dollar, as the tone of risk remains milder as the first European trade approaches.

China’s third-quarter GDP disappointed at 4.9% year-on-year versus 5.2% expected, hitting a new annual low. The resurgence of concerns over China’s slowdown, combined with soaring oil prices, dampened market sentiment and supported dollar bulls.

Meanwhile, Japanese Prime Minister Fumio Kishida has said he has no plans to change the sales tax. The pair is likely to be influenced by general market sentiment and the price action of returns, as the US data record is relatively rare.

Fedspeak will attract attention, however, amid rising hawkish expectations from the Fed.

USD / JPY: Technical outlook

“The first USD / JPY resistance level is on October 4, 2018, a high of 114.54, which is a crucial price point, unsuccessfully tested four times in four years. A break above the latter may pave the way for further gains, exposing key resistance levels like Jan 27, 2017, a high of 115.37, followed by Jan 9, 2017, a high of 117.52. On the other hand, a failure to 114.00 could open the door to a downside at the confluence of the current oversold RSI conditions, ”said Christian Borjon Valencia, FXStreet analyst.

USD / JPY: additional levels to consider


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