USD/JPY analysis: bulls lead but begin to hesitate

Valeria Bednarik FXStreet

USD/JPY Current price: 114.06

US Treasury yield curve keeps narrowing.
Major resistance at 114.40 under pressure.

The USD/JPY pair closed the week modestly higher at 114.06, having failed to overcome the 114.40 region, despite multiple intraday attempts. The Bank of Japan had its monetary policy meeting last week, but as usual, the Central Bank maintained the status quo with a null effect on the Japanese currency. US Treasury yields came under pressure last week, something that usually leads to an appreciation of the JPY, but this time was just enough to prevent the pair from breaking above the major static resistance, somehow indicating that bulls are in the driver's seat. The 10-year note yield closed Friday at 2.34% while for the 2-year bond it settled at 1.61%, as a result of US President Trump nominating Jerome Powell as the next Fed's head. The spread between both narrowed to its lowest level since 2007 Friday, something that the market understands as a warning sign, as an inverted curve usually anticipates a recession period. Technically, the pair is neutral-to-bullish, but at the upper end of its last eight-month range, which increases the risk of a bullish extension. In the daily chart, the price is developing well above the 100 and 200 SMAs, both converging around 111.35, while technical indicators lost momentum, but remain above their mid-lines. In the 4 hours chart, the moving averages maintain their bullish slopes below the current level, but the Momentum diverges lower, currently pressuring its mid-line, while the RSI heads south around 54, suggesting the pair may ease early Monday. Anyway, the upward potential won't be at risk unless the pair breaks below the 113.25 support.

Support levels: 113.60 113.25 112.80

Resistance levels: 114.40 114.85 115.10

View Live Chart for the USD/JPY

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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