USD/JPY in no man's land between key support/resistance awaiting Fed

USD/JPY started out the day with a bullish gap that has been closed in Tokyo with a high of 110.40 and a low 110.20.

USD/JPY has been struggling since the end of May while US Yields have been well below the psychological 2.30% level in the 10 years. Analysts at Brown Brothers Harriman explained that the US 10-year yields rose from 2.13% on June 6 and finished the week around 2.22%, so a slightly better performance that has given the dollar a bit of a boost of late. However, the analysts explained that the 10-year yield has been below its 20-day moving average (now ~2.23%) since May 17.   

"The Fed has hiked rates three times in the cycle so far, and each time bond yields have moved lower. Both in December 2016 and March 2017, the 10-year yield had risen markedly and was near the upper end of a broad range when the Fed cut.  This time yields are at the lower end of a six-month range.  The September note futures posted an outside down day before the weekend. The technical indicators favour follow through selling next week.  A break of 125-30 would strengthen the case of a top in price (low in yield)." 

The week ahead: Central Banks, UK and EZ key data, antipodeans in focus

We now await the FOMC this week and key US data in retail sales and CPI. While the market expects a rate hike fro the Fed, the statement will be key for driving market sentiment. Any surprises one way or the other could set the tone for the dollar for the medium term. 

USD/JPY levels

Bearish momentum signals are softening toward neutral, DMI’s are converging, and ADX trend strength is flattening out. USDJPY has climbed back toward its 200 day MA around the mid point of the handle and the weekly candle appears set to deliver a hammer. A break to the downside would target the 109.10 and recent lows while a rally through 111.50 would break the decending resistance linw and put the pair back into bullish territory.