USD/JPY eases from its recent highs but a steeper decline seems unlikely

Risk-on weighs on the greenback, sending the USD/JPY pair lower after hitting 105.62, its highest in a week. Nonetheless, the pair’s bearish potential is limited, Valeria Bednarik, Chief Analyst at FXStreet, briefs.

Key quotes

“US Treasury yields reached a fresh one-year high in pre-opening trading, with that on the 10-year note hitting 1.25%, currently around 1.23%. Higher government bond yields usually reflect risk-appetite and tend to play against the Japanese currency, considered a safe-haven alongside the greenback. The relation has changed these days, with the greenback falling against most major rivals in risk-on scenarios.”

“In the near-term, the risk of a steeper decline seems limited, as, in the 4-hour chart, USD/JPY keeps developing above bullish moving averages. Technical indicators retreated from overbought readings but lack bearish strength, consolidating well into positive levels.”

“The main support is 104.95, the 38.2% retracement of the mentioned daily advance.”