USD/JPY: bulls eye 110.60's on break of 200-D SMA
- USD/JPY bulls targeting a breakthrough 110.50, (110.62 is 161.8% off May low & 76.4% of May drop).
- USD/JPY bulls tempered by corporate hedging requirements above 110.00 and geopolitical risks simmering the background.
USD/JPY is currently mixed in the Tokyo open where the Nikkei has failed to extend the risk-on sentiment after a very positive day on Wall Street that enabled traders to take on the 200-D SMA in USD/JPY.
- Wall Street: Nasdaq hit a new all-time high, Dow Jones closes above 25,000
USD/JPY hit a high of 110.26 in NY before pulling back to 110.08. However, and crucially, the bulls are committing on the 110 handle and the close above the Kijing 109.75 is bullish. The VIX was lower overnight and the DJIA closed above the 25,000 mark. EUR/USD was holding up the advance though on the back of the hawkish rhetoric coming from ECB members ahead of next week's policy meeting where the end to bond purchases will be discussed by the board. EUR/JPY, however, rallied to a few pips shy of 130.00.
- Funda-FX wrap: all eyes turning towards inflationary risks, ECB to address QE next week
Geopolitical risks
Geopolitical risks are also a factor holding up the advance through exporter hedging territory. We have the historic summit between Trump and N.Korea leader Kim Jong-un as a key risk factor next week, while the G& meeting this weekend will likely throw up trade wars back into the mix.
USD/JPY levels
Bulls can target a test of 110.62 as being the 161.8% off May low & 76.4% of May drop as a key resistance. Valeria Bednarik, chief analyst at FXStreet explained that the 4 hours chart shows that the pair settled above its 100 and 200 SMA for the first time since in two weeks:
"Technical indicators regained the upside, with the Momentum at fresh weekly highs and the RSI near overbought readings and within familiar ranges, all of which supports the upside, without confirming it yet. Relevant daily highs come as the immediate resistances on a break higher, 110.44 May 15th high and 110.90, May 22nd daily high. The upward potential will likely fade on a slide below the 109.75 support."