USD/JPY analysis: upward momentum could return once above 113.17
|USD/JPY Current price: 112.54
- Returning risk aversion could keep the pair range bound ahead of Fed's announcement.
- Japan and China starting the week with holidays, limited volume expected until London's opening.
The USD/JPY pair advanced for a second consecutive week to reach 112.86, its highest in over two months, but ended Friday flat at 112.54, as risk-aversion returned. The greenback advanced at the beginning of the day against its Asian rival on the back of continued demand for high-yielding assets, with US equities soaring to unchartered territory, but the positive sentiment turned sour after Brexit negotiations collapsed. US Treasury yields kept the downside limited for the pair, as the benchmark yield for the 10-year note closed the day unchanged at 3.06%, holding near multi-month highs ahead of Fed's meeting this week. Japan markets will remain closed on Monday amid a local holiday, therefore there won't be macroeconomic releases and volumes are expected to be quite low.
The pair retains a positive stance according to technical readings, although if risk aversion persists, seems unlikely that the pair could extend its gains. In the daily chart, it remains above moving averages, while technical indicators lack directional strength but remain well into positive territory. Shorter term, and according to the 4 hours chart, the risk is also leaned to the upside, as technical indicators are trying to bounce from around their midlines while moving averages maintain their upward slopes well below the current level. August high at 112.14 is the immediate support, while the pair could regain its upward momentum only above 113.17, July's monthly high.
Support levels: 112.15 111.80 111.45
Resistance levels: 112.85 113.20 113.50
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