USD/JPY advances to fresh 2019 highs above 111

• US 10-year T-bond yield rises sharply on Monday.
• US Dollar Index turns positive on the day above 96.50.
• Wall Street climbs higher led by financials and industrials.

The USD/JPY finally broke out of its 2-week old trading range and touched its highest level since late December at 111.17. As of writing, the pair was trading a couple of pips below that level, gaining 0.45% on a daily basis.

Hopes of the U.S. and China reaching a trade deal after President Trump announced that he delayed the increase in tariffs on Chinese imports allowed investors to move away from safe-havens on Monday. The positive mood weighed on the demand for the US T-bonds and boosted their yields with the 10-year reference adding 1% on the day. Supported by the yields’ upsurge, the rate-sensitive S&P 500 Financials Index rose nearly 1.5% to help Wall Street start the week on a strong note. At the moment, both the Dow Jones Industrial Average and the Nasdaq Composite are up 0.7% on the day.  

Additionally, the greenback took advantage of the market movements mentioned above and recovered its daily losses to give an extra lift to the pair. As of writing, the US Dollar Index, which dropped to 96.30 area in the early European morning, was at 96.60, up 0.12% on the day.

In the absence of macroeconomic data releases in the remainder of the session, the markets’ risk perception is likely to continue to drive the pair’s price action.

Technical levels to consider

The next critical resistance for the pair aligns at 111.55 (200-DMA). With a daily close above that level, the pair could target 112 (psychological level) and 112.60 (Dec. 20 high). On the downside, supports could be seen at 110.60 (daily low), 110.35 (20-DMA) and 110 (psychological level).