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  • USD/JPY consolidating at 105.30 after bouncing up from 104.90.
  • The Japanese yen on the defensive amid a broad risk sentiment.
  • Breach of 105.75/92 would confirm a strong reversal higher – Credit Suisse.

US dollar’s downside correction from 105.60 highs on Monday has been contained at 104.85 and the pair has returned to 105.30 and remains barely changed on daily charts.

Risk appetite hits the yen

The USD/JPY has remained steady above 105.00, consolidating gains after a 2% rally on Monday. News reports about the promising results of Pfizer’s COVID-19 vaccine’s large-scale tests boosted investor’s optimism and sent the safe-haven Japanese yen tumbling.

Furthermore, the rally on US T-Bond yields, which pushed the yield of the 30-year Treasury note to multi-month highs amid the broad risk appetite, provided a fresh impulse to the greenback which reflected on a 0.6% recovery of the US Dollar Index.

The greenback has trimmed gains on Tuesday, with the rally on US Treasury notes losing steam as the investors digest the news of the vaccine. The pair, however, remains steady, supported at levels right below 105.00 and might attempt to extend its rally below intra-week highs at 105.60.

USD/JPY: Breach of 105.75/92 would confirm a strong reversal higher – Credit Suisse

From a technical point of view, the FX analysis team at Credit Suisse points out to the 105.75/92 area to confirm a bullish reversal: “Key resistance moves to 105.75/92 – the 38.2% retracement of the fall from June and price resistance – a close above which would also see the 55-day average removed to suggest a base is also now in place a more sustained recovery can be seen. We would then see resistance next at 106.11, then further retracement resistance at 106.43/56.”

Technical levels to watch