USD/JPY looking for a break of key resistance?

• USD/JPY reverses the offer on a correction on US yields spiking.
• USD/JPY struggles at key resistance area. 

There has been a complete turnaround in the dollar with a spike in yields with the 10-yrs tracking down the 3% target. USD/JPY is back on the bid towards the 108 handle as a result and despite a turnaround in stocks. Currently, USD/JPY is trading at 107.80, up 0.50% on the day, having posted a daily high at 107.92 and low at 107.24.

FOMC Minutes: officials saw an appreciable risk of inflation lag to target

The markets initially factored in an element of the minutes that was airing a warning of caution to inflation forecasts fro some FOMC members. Hence the dollar dropped. However, since then, the yields bounced as did the dollar and may be down to the market forgetting that the January 30-31 meeting was in fact before the release of the strong figures on average hourly earnings (+2.9%), the better-than-expected readings in the CPIs and of course the financial market turbulence in the wake of these data, as analysts at Rabobank pointed out. With that factored, it might have made for a far more hawkish set of minutes and hence the yields and dollar goes bid.

What now?

USD/JPY has started to stabilise at these levels as we head towards the close with little on over the horizon in terms of further catalysts apart from a line up of Fed speakers, starting today with Randal Keith Quarles, Raphael W. Bostic tomorrow and Willian C. Dudley on Friday. 

USD/JPY levels

There had been a complex divergence of the daily RSI that was warning that we could have been seeing an end of the move lower. However, while the price is back above that 107.67 Tenkan line, 107.80 is still proving to be a tough resistance guarding 108.00. On the wide, 110.85 is key ahead of and 111.44/50 as being a double Fibonacci retracement that is lining up with a lower and descending 200-D SMA at 111.39.