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  • USD/JPY has opened in Tokyo on the front foot, albeit with a very slight bid within the 111.80s, hugging bullish territory following an overnight fresh two-month high at 112.14.
  • Currently, USD/JPY is trading at 111.83, between a range of 111.81 and 111.91.

USD/JPY was better bid throughout overnight sessions, but its fresh two-month high was short-lived and bears faded to 111.85 late NY. The DXY was well bid, taking on fresh techncial levels to the upside having broken the H&S neckline a 96.60/70 and made a high to 97.01 handle.

The main catalyst on the day came with the US ISM non-manufacturing index jumping from 56.7 in Jan to 59.7 in Feb (vs 57.4 expected), a three-month high and close to the 13-year high of 60.8 seen in Sep. “The result was led by 13-year highs in new orders, although employment eased. Further friendly trade tariff talk and reopening of the US government were likely catalysts. The long-delayed Dec new home sales data also handily beat expectations, with lower mortgage rates likely a factor,” analysts at Westpac explained.  

US  yields rising

As for yields, the analysts noted that the US 10yr treasury yield rose from 2.73% to 2.75%, partly helped by the data, but later retraced. “The 2yr yield rose from 2.54% to 2.57% and slipped back to 2.55%. Futures markets continued to price little chance of any further Fed rate hikes in this cycle.”

USD/JPY levels

Valeria Bednarik, Chief Analyst at FXStreet explained that the pair is trading little changed daily basis, confined to a tight range ever since the month started:

“Despite holding near its yearly high and being in a short-term consolidative phase which has high chances of being resolved to the upside, the pair may be due to a downward correction. In the 4 hours chart, technical indicators eased within positive ground, the Momentum now challenging its midline and the RSI heading lower at around 59, supporting such correction particularly if the pair falls below 111.65, the immediate support. The decline, however, will remain as corrective as long as the price holds above the 111.00 level, where it now has a bullish 100 SMA.”