- USD/JPY’s retreat from 111.13 to 110.75 has kept the 2015-2018 falling trendline intact.
- A convincing break above the long-term falling trendline remains elusive, likely due to relentless flattening of the Treasury yield curve.
The USD/JPY pair failed to scale the long-term falling trend line, likely due to flattening of the Treasury yield curve.
As of writing, the currency pair is trading at 110.80 – down 0.10 percent on the day. Meanwhile, as per the linear-scaled daily chart, the resistance of the trendline sloping downwards from the August 2015 high and December 2015 high is located around 111.00.
So, the retreat from 111.13 to 110.75 has kept the trendline hurdle intact. The USD is having a tough time scaling the key trendline in a convincing manner due to fears of a flattening yield curve.
At press time, the spread between the US 10-year treasury yield and the 2-year treasury yield stands at 32 basis points – the lowest level since 2007. Further, the spread between the 10-year and 7-year treasury yield is closing on inversion (negative).
The flattening of the yield curve is considered by many as a sign of impending recession and hence it is likely capping USD’s upside against the anti-risk Yen.
USD/JPY Technical Levels
Resistance: 110.63 (5-day moving average), 110.17 (200-day moving average), 110.00 (psychological level).
Support: 110.90 (June 15 high), 111.13 (session high), 111.40 (May high).
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