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  • USD/JPY has faded the drop to an eight-week low of 109.77 and is now trading above 110.00.
  • 10-year US-Japan bond yield differential favors the bears.

Currently, the USD/JPY is trading at a session high of 110.11, having clocked an eight-week low of 109.77 today.

The US dollar was offered in early Asia on fears that Fed may hike rates at a slower pace in response to  Trump’s criticism of Powell’s policy tightening plans.

Focus on yield differential

The spread between the US and Japanese 10-year government bond yield dropped to 273 basis points yesterday – the lowest level since late March – and look set to fall further in the USD-negative manner, as indicated by the head-and-shoulders breakdown.

Hence, it seems safe to say the recovery in the USD/JPY from 109.77 to 110.11 could be short-lived.

10-year yield spread

USD/JPY Technical Levels

Resistance: 110.46 (5-day MA), 110.70 (10-day MA), 111.00 (50-day MA)

Support: 110.00 (psychological support + 100-day MA), 109.85 (200-day MA), 109.37 (June 25 low)