Daily chart – A big move lower confirms following a spinning top candle signals short-term trend reversal. 23.6% Fib supp has been breached… and now the spot is chipping away the trend line support. A day end close back inside the symmetrical triangle pattern would open downside towards 50% Fib.
I feel the US data was bearish… the pair is telling it is other way round. the strength here is more due to BoJ’s bond buying effort today…
Inverse head and shoulders on monthly chart…
but the RSI is close to being overbought…so another 100 pip move on the higher side before exhaustion creeps in…
We have a symmetrical triangle pattern on the daily chart. triangle resistance is 113.40. I expect a bullish break soon as dips to 5-DMA (red line) today found fresh bids. The rebound from the low of 112.73 also marks failure on the part of the bears to keep the spot below 112.93 (June 29 high).
The 2-year treasury yield rose to nearly 9-year high of 1.426%. The yield curve has steepened as well.
A daily close above 113.40 would clear way for a re-test of 114.36 (May high), Caution is advised thereafter as the RSI would be overbought by then.
10-year yield is up 2.3bps, 30-year yield is up 1 bps. 2-yr and 5-yr yields are up 2.4 bps and 2.6 bps, respectively.
Still its not steepening of the yield curve, We need to see a bigger jump in the 10-yr yield as compared to the 2-year yield. Nevertheless, dollar is on the rise. USD/JPY clocked a fresh session high of 113.28 and is likely to test 113.42 (stiff resistance)
50% Fib hurdle is seen at $49.49. Gains in oil prices would push US 10-yr breakeven rate (long-term inflation expectations) higher and lead to steeper yield curve, which is positive for the USD.
For USD/JPY it could mean 113.42 (symmetrical triangle hurdle)
113.42 is a symmetrical resistance. Strong US ISM manufacturing today and on-manufacturing later this week could easily result in a more sustained break above 113.42 hurdle.
Symmetrical triangle is a bullish continuation pattern, so a weekly close above 113.42 would signal continuation of the rally from the recent low of 108.13.
Treasury yield curve steepened last week and continues today as well. The 10-year yield is up 1.4 basis points, while the 30-year yield has added 1.2 bps. Short duration yields are trading flat lined…let us hope the technical correction in oil is translated into a sustainable rally….
USD/JPY jumped to a high of 114.59 on Thursday as March Fed rate hike probability neared certainty following hawkish comments from the Fed officials.
It is no surprise to us as we believe Fed is a silent cheerleader of Trump’s policies.
If we take a look at the daily chart, the action over the last two months looks like a mini version of the setup seen during May 2016- Nov 2016 period.
Source: Netstatio – http://www.netdania.com