Currently, USD/JPY is trading at 110.08, down -0.09% on the day, having posted a daily high at 110.30 and low at 110.05.
USD/JPY is soft in the opening hour of Tokyo and has lost some of the conviction on the 110 handle that it otherwise had to offer with a shallow bid to 110.30 from overnight business and risk-on markets.
US 10yr yields rose overnight from 2.13% to 2.18% while the Fed fund futures yields continued to price the chance of a December rate hike at 41%, but much of the market is not even as convinced as that currently. However, the saving grace for the dollar came with the comments from Treasury Secretary, Steven Mnuchin. He hopes for a tax overhaul by the end of the year. Mnuchin also hinted that the Trump administration could consider backdating the tax reform to the start of 2017.
Stocks were positive, (the S&P500 is up 0.3% to a fresh record high), and US yields were rising, being a toxic combination for the JPY. However, analysts at Scotiabank noted that although geopolitical risks remain obvious, the near-term trajectory for the USD looks to be higher, targeting the upper 110s (late Aug high).
Valeria Bednarik, chief analyst at FXStreet explained that the 4 hours chart shows that the price remains well above the 100 and 200 SMA, which at least have lost their bearish strength, whilst technical indicators pared gains within an overbought territory, which is not enough to confirm an upcoming downward correction.
“The pair has anyway advanced almost straight since bottoming at 107.31 last week, which means that, despite not seen yet, a downward correction is possible, particularly if the pair is unable to advance beyond the immediate resistance.”