Wednesday, January 17, 2018
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USD/JPY: downside open to 112.10?
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  • Yen headed for a break higher towards 112.10 vs the greenback?
  • Fed speak mixed, but equities robust as a likely cap on the yen?

USD/JPY price action was subdued overnight despite a rally on Wall Street and higher rates. USD/JPY fluctuated between 112.90 and 113.40, closing at 113.06 while in Tokyo, the price is currently trading at 113.15, up 0.08% on the day, having posted a daily high at 113.20 and low at 113.00.

Overnight, the DXY was up 0.4% while we had a lack of data to start the week off. There was some Fed chat that was crossing the wires. Starting with Fed’s Williams, he said price-level targeting has benefits while painting a benign picture of Fed rate hikes, albeit highlighting the strength of the U.S. economy. Then, Fed’s Bostic said that the Fed should be cautious if yield curve continues to flatten while arguing that three rate hikes in 2018 may be too much.  Dudley’s speech on Thursday will be a  key window on the Fed’s thinking now that the tax cut was enacted given that the NY Fed president had previously not seen a need for fiscal stimulus.

US equities paused for breath

Meanwhile, US equities paused for breath with the S&P 500 up 0.1% and the Dow flat, though the Nasdaq rose 0.3%.US 10yr treasury yields eked a slightly higher range of 2.46%-2.49% – the latter the highest since 26 Dec as noted by analysts at Westpac. “Short-maturities yields remained steady, 2yr treasury yields ranging between 1.95% and 1.97%. Fed fund futures priced the chance of another rate hike in March at 63%,” explained the analysts at Westpac.

USD/JPY levels

Valeria Bednarik, chief analyst at explained that the 4 hours chartshows that bulls have lost the grip, at least temporarily, as technical indicators turned lower with the Momentum heading modestly lower within positive territory, and the RSI aiming to regain the upside after correcting overbought conditions, currently at 55. “In the mentioned chart, the pair bounced from a flat 100 SMA, providing now an immediate dynamic support that once broken, should lead to a decline towards the 112.10 price zone,” Valeria argued.

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