U.S. government debt yields rose Thursday after the Department of Labour reported that CPI data posted its largest annualized gain in more than six years. The spread between the yield on the 10-year note and the two-year is getting tighter which points towards a stronger Dollar and the Yen is not responding to risk aversion as USDJPY recovery continues. However, the USDJPY continues its solid upmove clearing past some critical resistance lines and levels along the way. Momentum is clearly in favour of further upside, but with risk sentiment remaining as wobbly as it is in other asset classes, a sizable retracement looks par.
The pair rose to the highest level since January hitting 112.77, the short term outlook for the pair remain bullish as it managed to hold above its pivot level at 111.95. The technical indicators entered positive territory, maintaining their bullish slopes. However, the RSI on the 4-hour chart is also flashing overbought conditions which may lead to a correction after the rally.
Support: 111.75 111.40
Resistance: 113.05 113.62