USD/JPY: thin liquidity opening bullish gap, where next?
- USD/JPY: has gapped higher to 107.19 start of week.
- USD/JPY: still below trend support, bearish bias despite robust US equities.
USD/JPY has gapped higher to 107.19, (a few pips higher than the previous late Asia session highs), in thin liquidity at the start if this week from the Friday close of 106.87 - (Wall Street was gutsy on Friday, S&P +1.61%, DJIA +1.39% ).
USD/JPY was paring back European losses on Friday, rallying from the 106.50 region and made a high of 106.93 with a lower VIX and higher equity prices supportive of the DXY, (despite softer yields. The US 10yr treasury yields dropped back from 2.93% to 2.86%. The 2yr yields fell from 2.25% to 2.24%).
The close, however, was below the trend support for another week while the 108 handle remains a key objective for the bulls. There is little at the start of this week for the pair while we await Fed Chair Powell to deliver his first address to Congress on Tuesday vs the host of Fed speakers last week and general bullish optimism for the US economy and hawkish leaning in their monetary policy outlook.
USD/JPY levels
Valeria Bednarik, chief analyst at FXStreet explained, that on a daily basis, the pair is still at risk of falling further:
"It stands far below its 100 and 200 SMAs, both converging over 600 pips above the current level, while technical indicators have corrected oversold conditions, but hold well into negative territory and below their previous highs. In the 4 hours chart, the 100 SMA maintains a strong downward slope near the weekly high, while the Momentum indicator turned flat within negative territory as the RSI advances modestly around 47. The pair has bottomed around the 61.8% retracement of its latest bullish run but holds below the 38.2% retracement of the same rally at 107.05, an immediate resistance."