USD/JPY holds higher just above 106.60 amid higher Treasury yields
But the upside momentum since last week has largely stalled around the 38.2 retracement level around 106.68 with the high today also seen at 106.67 only.
However, buyers have continued to keep the near-term bias in their favour by maintaining price above the key hourly moving averages for the most part. That said, the trading range for the pair this week so far has been relatively narrow – a mere 56 pips.
It goes to show that traders are largely waiting on the Fed at Jackson Hole to provide more clues about where the pair (and bonds) should go next. That will be the key risk event ahead of the weekend.
As for levels to look out for, buyers will be looking towards establishing a break above near-term resistance around 106.68-78 first before aiming towards the 107.00 handle. I reckon a break above that could see a larger extension to the upside towards 108.00 – provided that it is supported by Fed rhetoric later on.
Meanwhile, any downside move will have to break below the key hourly moving averages @ 106.48 and 106.31 before revisiting support around 106.00 and then the swing region around 105.66 and 105.50.
In any case, it’s tough to see bonds getting a major surge considering market pricing currently so I reckon any major downside move towards 105.00 will be lacking. That shows that the risks going into Jackson Hole is skewed towards the upside.