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  • USD/JPY clocked a six-month high despite risk-off sentiment.
  • Yen takes cues from Yuan and other Asian currencies.
  • The USD/JPY hourly chart shows overbought conditions, so the rally could stall for a few hours or a minor pullback could be in the offing.

The USD/JPY pair rose to 112.35 in Asia – the highest level in January despite escalating US-China trade tensions and the risk-off sentiment.

The Japanese Yen is increasingly taking cues from the sliding Asian currencies, especially the Chinese Yuan as broad realignment is underway due to anticipated changes in terms of trade, according to Reuters.

So, the traditional Intermarket correlations have broken down, i.e. JPY is not responding to risk aversion. For instance, Dow Jones Industrial Average (DJIA) fell more than 200 pips, still, USD/JPY has found acceptance above 112.00

The currency pair has cleared a key long-term falling trendline hurdle and could rise to 113.00 if the US consumer price index, scheduled for release at 12:30 GMT today, beats estimates.

As of writing, the USD/JPY pair is trading at 112.28 and looks overbought as per the 14-hour relative strength index (RSI). So, the currency pair could trade in the sideways manner over the next few hours or could see a minor pullback to 112.00.

Hourly chart

Spot Rate: 112.28

Daily High: 112.35

Daily Low: 111.91

Trend: Intraday overbought conditions

Resistance

R1: 113.00 (psychological level)

R2: 113.23 (200-week moving average)

R3: 113.75 (December 2017 high)

Support

S1: 112.06 (10-hour moving average)

S2: 111.34 (50-hour moving average)

S3: 110.97 (100-hour moving average)