USD/JPY: making fresh highs in Tokyo in improved risk sentiment

• USD/JPY: bulls taking charge.
• USD/JPY: heading for 10-D SMA?

USD/JPY is making fresh recovery highs in the Tokyo open with an improved risk environment. Currently, USD/JPY is trading at 106.37, up 0.20% on the day, having posted a daily high at 106.39 and low at 106.15.

Optimism in the equities markets helps to lift the major while otherwise, the dollar found some demand on the back of US yields with the 10yr treasury yield moving up from 2.82% to 2.89%. The Fed fund futures are still pricing in three more hikes by end-2018 and a further hike in 2019. DXY traded in a range between 89.833 - 90.216, finishing up 0.16% for the day. Subsequently, USD/JPY rallied through the 106 level with receding US trade war angst ahead of this week's risk events in the BoJ and nonfarm payrolls on Friday. 

BoJ and nonfarm payrolls expectations

The BOJ is expected to leave monetary policy unchanged at the next meeting. "The all-Japan core inflation rate (the general CPI excluding fresh food) has come in at 0.9% y-o-y for three consecutive months through January 2018 and, although the reading has been solid, the results are unlikely to satisfy the BOJ. Yen appreciation versus the dollar since the start of 2018 is another factor that makes it difficult to decide to normalize monetary policy," analysts at Nomura explained, adding, "We expect a strong, 210k increase in nonfarm payroll employment in February, with 205k from the private sector and 5k from government payrolls."

USD/JPY levels

We have resistance at 106.96 (10-day sma) seconded by 107.41 (21-day sma) and finally 107.92 (high Feb.21). On the flip side and in a breakdown of 105.25 (2018 low Mar.2) bears will target 102.54 (low Nov.3 2016) and then 101.15 (low Nov.9 2016).