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  • USD/JPY started in Tokyo sideways, hovering around the 111 figure and directionless.  
  • USD/JPY caught a risk-on bid overnight, breaking up through the top side of the symmetrical triangle.  
  • USD/JPY is currently trading at 111.05 between an Asian range of 110.99 and 111.07.  

The yen was soft overnight as investors cheered further signs of progress in the US-China trade talks which boosted European and US equities. Subsequently, US yields rose across the curve, with the 10y recovering most of the ground lost on Friday. The US 10yr treasury yield climbed from 2.66% to 2.68%, while the 2yr yield rose from 2.50% to 2.52%.  

While the futures markets continue to price out a rate hike in 2019, Fed President Bostic repeated his forecast for one hike in 2019 and one more in 2020 in order to put Fed policy rates at neutral, expecting inflation to exceed 2% this year. He was somewhat concerned for higher tariffs and wage gains from the strong labour market affecting inflation.

Fed Powell coming up

Looking ahead for the day, focus now shifts to Powell’s testimony, as markets continue to expect dovish guidance in the near term.  “Fed chairman Powell delivers the first leg of his semi-annual testimony to Congress in the NY morning, to the Senate finance committee. The prepared text was released on Friday. The senators should be pleased with the FOMC’s steady rates message, though they will no doubt have plenty of questions aimed at scoring political points,” analysts at Westpac explained.  

USD/JPY levels

Valeria Bednarik, Chief Analyst at FXstreet explained that the pair holds on to gains, hovering around 111.10:

“The short-term technical picture favors another leg higher, as in the 4 hours chart, moving averages gain upward momentum well below the current level, with the 100 MA currently around 110.30. Technical indicators in the mentioned chart have pared their advances near overbought readings, holding near their daily highs. The next relevant resistance is the 111.40 region, with gains beyond it probably putting the pair o track to reach 112.00 during the next session. Chances of a bullish continuation will fade if the pair losses the 110.90 support.”