USDJPY traded up to 118.70 this morning but could not hold onto its gains.
Another day another seemingly inevitable new high in USD/JPY. The rise in US yields overnight gave it yet another jump start into Asian trading. USD?JPY being brought up into the highs of 117.70 on the Tokyo fix. The rally was short lived however as a rise in 10-year JGB yields to a whopping 0.1% took the wind out of USD/JPY’s sails.
It’s hard to believe that such a tiny increment could be quoted as a reason for the sudden move back in USD/JPY, but I guess it highlights just how sensitive USD/JPY to the rate spread differential. Other factors include a lot of Japanese exporters related offers into 119.00 as well as plenty of option strikes there. We have also come a very long way in a short amount of time this week. The Bank of Japan meets next week as well on the 20th, which may also be giving the street food for thought. Although I expect nothing from it, 2016 has dished out plenty of painful lessons on that front.
Time for a pause maybe? Well, looking at the weekly chart the picture isn’t so clear on that point.
On the weekly chart below we have a very clear descending trendline that comes in at 118.85 area. A weekly close above portends a move technically, to my previously stated targets around 121.50. Having failed so “perfectly” ahead of this level today though does imply that the 118.80/119.00 will be a tough nut to crack into the weekend.
Support appears at the 100-week moving average at 115.75, also conveniently the weeks low.
However, I also note the MACD fast line (in blue) is showing no signs of topping out to signal any bearish divergence. Similarly, the weekly RSI has only just ever so slightly moved into overbought territory.
In summary. 119.00 is clearly going to be a significant level to break technically and due to the resting orders on the street in the area. However, the weekly technicals show there is still the possibility of life in the move. The weekly USD/JPY close will be the key.