Article by ForexTime
USD/JPY is trading at the highs of the session and recently hit the 107.15 level. The interest rate differential between the US 10-year and the Japanese JGB hit a high of 100 basis points driving the currency pair higher. The 107.15 print is a new six-year peak. The gain reflect broad yen weakness, seen after BoJ Kuroda’s assurance to PM Abe that the central bank won’t hesitate to take further action should the 2% inflation target become difficult to achieve.
Central Bank President Kuroda did not mention the yen is a speech Thursday, which was taken as a tacit acceptance of the currency’s weakening path. He has said last month that FX moves have been consistent with fundamentals. Recent data showed that Q2 GDP data showing a 7.1% drop, largely due to the three-percentage-point rise in the sales tax to 8%, which was implemented in April. Markets continued to view the BoJ has being headed for further monetary stimulus.
Yields in the U.S. backed up another notch at the long-end and remained elevated into supply in the 10-year. The bond market remained very wary of any alteration of FOMC policy guidance next week that could be construed as bringing forward a rate hike.
Target resistance on the USD/JPY is now seen near the 2008 highs at 10.50. Support on the currency pair is seen near the 10-day moving average at 105.50. Momentum on the currency pair is positive with the MACD (moving average convergence divergence) printing at its highest level seen in the past 12-months. The trajectory of the MACD points to a higher exchange rate. The RSI (relative strength index)moved higher with price action reflecting accelerating positive momentum while printing a reading of 79, which is well above the overbought trigger level of 70 and could foreshadow a correction.
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