A bid USD/JPY intermarket: US yields and stocks recovery, plus French elections fuelling the bid
USD/JPY is trading at 109.90 within a range of 109.82 - 110.64 and up 0.76% on the day.
Investors got behind the risk-on trades after the positive outcome fo the first round of the French elections for global markets. The move is an extension of the recent come back when the dollar snapped a two-week slide against the yen. This came on the back of the S&P 500 rising for the first time in three weeks, and the 0.85 gain was the most since mid-February.
"When everything is said and done, the S&P 500 is still about 2% from its record high seen at the start of last month," explained analysts at Brown Brothers Harriman (BBH) who are suggesting that the most likely scenario, from a technical perspective, may be continued consolidation (in a potential larger triangle or wedge pattern). "The April low is above the March low, while lower highs have been recorded. That down sloping upper trendline is seen in the 2360-2365 area. "
- Is the 7 May second-round polling likely to change in the next two weeks? - Nomura
- The week ahead: eyes on EUR/USD, risk-on tone to persist post French election Round one?
At the same time, US 10-year yields moved back above 2.20%, but the analysts at BBH explained that until they manage to get back above 2.30%, it is not clear that the low is in place. Indeed, they have struggled to get above 2.25%. The June note futures contract has built a shelf around 125-24. A break of that is necessary to boost confidence that a top is in place." For the week ahead, if the tone remains positive, there are still plenty of risk events in the ECB, US GDP first estimate for Q1, durable goods and Japanese CPI.
USD/JPY levels
USD/JPY rallied in a correction from the 55-week ma at 108.36 while today's French election rally took the pair through a key resistance line of 109.88. 112.08 is on the cards should the rally continue while to the downside, the major supports below 108.13 according to analysts at Commerzbank will target 107.50 July 2016 high and possibly 106.85, "The 61.8% retracement and we cannot rule this out but this is not our favoured scenario," the analysts added.