USD/JPY: bulls holding form and claiming ground in high 112’s

• USD/JPY is currently trying to stabilise and hold its form in the upper end of the 112 handle.
• The risk mood was solid overnight but the yen has hardly played out its safe haven role of late.
• Technical readings in the 4 hours chart, support further gains ahead.

USD/JPY is currently trying to stabilise and hold its form in the upper end of the 112 handle after losing some ground to profit taking and disappointing data in the US session overnight. The pair slipped from 112.80 to 112.66 at the open but is recovering back towards the eighties of the 112 handle again at the time of writing.  

The risk mood was solid overnight but the yen has hardly played out its safe haven role of late and instead, the dollar gave out on a slightly less hawkish Powell and indeed a very disappointing set of housing starts. Later in the session, the Beige Book upheld the positive sentiment around the US economy and subsequently stopped the bear’s in their tracks in the dollar within the day’s range of between 94.9580-95.4070.  

Market reactions

As for equities, the DJIA advanced by 79.40 points, or by 0.3%, to 25,199.29. This was the blue-chip gauge’s fifth positive session, ( its longest winning period since the eight-day period ended May 14th). Similarly, the S&P500 was up 0.2% by the close. The US 10yr treasury yields jumped from 2.85% to 2.88%, while 2yr yields, which made a 10-year high of 2.62% in Asia, were levelled around 2.61%.  All in all, the dollar still has the advantage on a central bank divergence trade-off and the Fed fund futures yields continued to price 1 ½ more hikes in 2018.

USD/JPY levels

Valeria Bednarik, chief analyst at FXstreet explained that the technical readings in the 4 hours chart, support further gains ahead:

The pair is developing well above its 100 and 200 SMA, which extended their upward slopes, while technical indicators stabilized well into positive territory, the RSI after correcting overbought conditions. Dollar’s latest decline seems corrective and the pair still has room to extend its advance beyond the 113.00 figure, although a stepper downward move could come on a break below the 112.50/60 region, the immediate support area.”