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USD/JPY: bulls testing the 21-hour SMA in Tokyo

7/9/2018, 10:19:20 AMMarket Analysis
USD/JPY: bulls testing the 21-hour SMA in Tokyo

USD/JPY is turning higher in Tokyo in a slow start to the week following a goldilocks nonfarm payrolls that sent the greenback somewhat lower on profit-taking. USD/JPY is currently trading at 110.49 from a low of 110.38 and a high of 110.53 - (21-hr SMA 110.52).

USD/JPY  fell from 110.70 to 110.40 while the US jobs data came out mixed. There was strong jobs growth in June but it was outweighed by the disappointing unemployment and earnings numbers that sent the greenback lower across the board. 

Risk sentiment keeps bulls in play

US stocks rallied, with risk sentiment improving, denting the bearish case in USD/JPY. The headlines read as 213k vs the expected 195k while the May level was revised higher to 244k (from 223k although average hourly earnings only rose by 0.2% m/m, remaining at 2.7% y/y vs the expected 0.3% and 2.8%. 

However, US 10yr treasury yields are little changed overall and USD/JPY consolidates. The yields spiked lower after the job report, moving from 2.83% to 2.81%, but later retraced. Two year yields behaved similarly but were contained inside 2.53% and 2.55% - (Fed fund futures yields continued to price 1 ½ more hikes in 2018).

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the daily chart for the USD/JPY pair shows that it holds above its 100 and 200 DMA:

"The Momentum is now around its mid-line and the RSI heading lower at 54, indicating decreasing buying interest. Shorter term, and according to the 4 hours chart, the pair is technically neutral, as it is developing a few pips above directionless moving averages, while technical indicators head nowhere within neutral levels. The risk of a downward extension will increase on a break below 110.25, the weekly low."