USD/JPY -‘Dead cat bounce’ as treasury yields remain near three-week lows

Is it a bear in bulls clothing? The recovery in the USD/JPY pair from the low of 116.69 ran out of steam at a high of 112.11 as it lacked the support of the treasury yields. The Dollar-Yen is currently attempting a break below 111.94 - 100% Fib Ext. of 114.495-112.86-113.578. 

10-year treasury yield takes the support of 50-DMA

The 10-year treasury yield is working hard to avoid a break below the 50-DMA level of 2.256%. The current yield is the lowest since July 29. Dollar-Yen fell to a low of 116.69 yesterday as the yield on the 10-yr Treasury note fell from 2.3% to 2.26%. 

The oversold conditions on the Intraday charts helped USD/JPY trim losses, however, the recovery is falling apart at Tokyo open, given the yield remains around the overnight lows. 

Keep an eye on the 10-year yield as a break below 50-DMA support of 2.256% could trigger another wave of selling in the USD/JPY pair. 

USD/JPY Technical View

FXStreet Chief Analyst Valeria Bednarik says, “Technical readings support additional slides ahead, given that in the 4 hours chart, the pair settled well below its 100 SMA and barely above the 200 SMA, whilst technical indicators have bounced modestly from oversold readings, but remain within negative territory. A break below the mentioned Fibonacci support, the pair has scope to extend its slide towards 110.90, where the pair presents multiple intraday lows from last June.”

Jim Langlands from FX Charts expects the spot to trade in a range of 112.25-113.25 levels over the next 24 hours or so. He is bullish on the USD/JPY pair in the medium-term and sees dips to 111.30-111.70 as a buying opportunity. 

USD/JPY key levels

Support - 111.94 (100% Fib Ext.), 111.80-111.74 (50-DMA, 100-DMA, 200-DMA), 111.65 (50% Fib R of 108.80-114.49), 111.16 (weekly 200-MA)
Resistance - 112.11 (resistance on 1-hr), 112.33 (1-hr 50-MA), 112.46 (falling channel resistance), 112.71 (1-hr 100-MA)