USD / JPY Recovers to Three-Year Highs Above 114.00 Amid Market Risk Appetite

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  • USD / JPY soars for the week, despite the weakness of the US dollar across the board.
  • Rising US Treasury yields prop up USD / JPY.
  • US retail sales surprised to the upside, increasing 0.7%, more than expected.

The USD/JPY It extends its rally for a month and a half, advancing 0.47% during the American session, trading at 114.21 at the time of writing this article. As shown by US equity indices rising 0.46-1.12%, positive market sentiment in financial markets weighs on the Japanese yen.

Also, US Treasury yields, which are positively correlated to the USD / JPY pair, are on the rise. The 10-year US Treasury yield rose to basis points to 1,577%, pushing the dollar against the yen.

Meanwhile, upbeat US macro data helps the dollar. Surprisingly, US retail sales in September rose 0.7%, higher than the 0.2% contraction predicted by economists. Excluding cars and gasoline, sales expanded 0.7%, better than 0.5% in the previous month.

Additionally, the University of Michigan Consumer Sentiment Index reading was 71.4, worse than the 72.8 estimated by investors, the second-lowest reading since 2011, as consumers became more concerned about current conditions and the economic outlook. .

USD / JPY Price Forecast: Technical Outlook

USD / JPY had witnessed a 400 pip rally since October 4, when it was trading around 110.50. The Relative Strength Index (RSI) at 75, shows that the bullish move is overextended, as the RSI showed oversold conditions since October 11. On the same day, the 50-day moving average (DMA) crossed the 100 DMA, giving a boost for the pair, as the correct order for moving averages in an uptrend is the moving average of shorter time frames, over those of longer time frames.

That said, the first resistance level for USD / JPY is October 4, 2018, with a high of 114.54, which is a crucial price level, tested unsuccessfully four times in four years. A break above the latter can clear the way for more gains, exposing key resistance levels such as January 27, 2017, with a high of 115.37, followed by January 9, 2017, with a high of 117.52.

On the other hand, a failure at 114.00 could open the door for a drop at the confluence with the current RSI oversold conditions. The first of the critical support levels to be tested would be the October 13 high at 113.79, followed by the October 12 low at 112.99, and then the October 8 high at 112.24.



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