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  • The USD/JPY pair is trading at the highest level since mid-December and is currently sitting well above the 200-week moving average.
  • Yield differentials will likely continue to favor the USD bulls.  
  • US-China trade tensions to play spoilsport.

The USD/JPY is trading at nine-month highs above the 200-week MA in Asia.

The pair rose to 113.47 yesterday – the highest level since mid-December and was last seen at 113.36.  

Further, it climbed the 200-wee MA hurdle of 113. 20 in a convincing manner yesterday, validating the long-term bull break above the trendline sloping downwards from 2015 highs.

The stellar rise is likely associated with the strong US data releases, according to Kathy Lien from BK Asset Management. For instance, the latest US GDP report published yesterday showed that economy expanded at the fastest pace in nearly four years. Further, August durable goods blew past expectations.

What’s more, the hawkish interpretation of the Fed’s decision to remove the word “accommodative” likely put a bid under the greenback as well.  

Looking forward, the growing divergence between the Fed and the Bank of Japan (BOJ) could see yield differentials widen further in a USD-positive manner.  

However, the US-China trade tensions could spoil the bull party. According to FXStreet Editor and Analyst Ross Burland, “USD/JPY tends to hang in the balance of such geopolitical angst with the yen catching a repatriation bid at times of extreme risk-off sentiment in the markets attracting subsequent risk-off flows.”

USD/JPY Technical Levels

Resistance: 113.75 (December 2017 high), 114.74 (November 2017 high), 115.00 (psychological hurdle)

Support: 113.20 (200-week MA), 112.66 (10-day MA), 111.12 (August high)