USD/JPY backs off slightly from the highs
And price now heads back towards the 111.00 handle. USD/JPY has enjoyed a rather positive run since Thursday as risk sentiment improved and that saw buyers regain near-term control of the pair as price climbed above the 200-hour MA (blue line).
The high today touched 111.18 but buyers ran into some resistance from the 19 March low near the 76.4 retracement level at 111.23. From a technical perspective, the pair is starting to gain further upside momentum in the near-term. We're starting to see the 100-hour MA (red line) cross over above the 200-hour MA and that's a positive sign for buyers.
Fundamentally, risk sentiment is also shrugging off recent global growth worries and that could prove to be enough for buyers to continue a further upside run in the pair.
That said, things can easily flip on its head in an instant with any sour headlines from trade or renewed focus on the slowing global economy is enough to dampen the upside mood.
I still reckon the pair is headed for a lower move in the bigger picture but fundamentally, we may not see flows support that until 2H 2019. For now, near-term flows still dictate the picture and the chart is looking a tad more positive in the shorter term.
Something to also consider in the bigger picture is that we're recently seeing a bit of divergence in USD/JPY price action to the yields spread between 10-year Treasuries and JGBs:
While yields spread between the two have narrowed quite a bit over the past month, USD/JPY continues to hold rather steadily between 110.00 to 112.00. This could be something that could come back to bite at the pair down the road.
