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  |   Technicals


FxWirePro: USD/JPY consolidates cloud breakout, Fed's hawkish shift and improving risk appetite likely to support upside

USD/JPY chart - Trading View 

Spot Analysis:

USD/JPY was trading 0.03% lower on the day at 110.70 at around 06:25 GMT

Previous Week's High/ Low: 110.79/ 109.12

Previous Session's High/ Low: 110.79/ 110.24

Fundamental Overview:

Risk sentiment improved on Monday as Evergrande contagion fears recede. Markets hopeful that Beijing will contain Evergrande fallout.

Bank of Japan (BoJ) Gov Haruhiko Kuroda said on Monday the central bank would continue to focus on cushioning the economic blow from the coronavirus pandemic.

He said that the uncertainty over economic outlook still lingers. But, added that the economy's recovery would become clearer as the impact of the pandemic subsides, and pent-up demand props up consumption.

On the other side, Fed's latest hawkish shift saw bond yields climb to their highest since the start of July in anticipation of tighter U.S. monetary policy. The lift in yields underpin the U.S. dollar.

Focus now on U.S. fiscal policy with the House of Representatives due to vote on a $1 trillion infrastructure bill this week, while a Sept. 30 deadline on funding federal agencies could force the second partial government shutdown in three years.

Technical Analysis:

- USD/JPY has paused after 3-day bullish streak

- The pair is consolidating break above daily cloud and Symmetric Triangle

- Momentum is bullish, Stochs and RSI are biased higher, volatility is high and rising

- Price action is above major moving averages and GMMA indicator shows minor trend is bullish

Major Support and Resistance Levels:

Support - 110.19 (Daily cloud), Resistance - 111 (Psychological mark)

Summary: USD/JPY is hovering around Double Top at 110.80. Break above will support further gains. Weakness only on retrace below daily cloud.

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