USD/JPY extends gains and hits fresh highs above 111.00

• US dollar erases losses against yen, back to the 111.00 area. 
• Higher US yields supported the USD/JPY rally. 

The USD/JPY pair kept it bullish tone and reached a fresh daily high at 111.03, moving close to Monday’s highs. So far it has been unable to hold firmly above 111.00 but the bullish tone remains intact. The move to the upside took place amid higher US bond yields and it was also supported from a rebound in equity prices in Wall Street.

“Core yields increased across the board: the US Treasury 10Y yield rose after the release of better-than-expected economic data while the German 10Y yield also increased as confidence indicators overshot expectations. The concerns showed by the European Commission over the high imbalances in the Italian economy and worries about the fiscal stance led the Italian risk premium to increase with no contagion to Spain and Portugal’s risk premia”, said analysts at BBVA. The 10-year rose from 2.63% to 2.68%, reaching the highest since February 21. 

Market participants now focus at the UK Parliament that is set to vote on Brexit amendments. On Thursday, during the Asian session, economic reports from Japan are due (retail sales, industrial production and housing data) while in the US, Q4 GDP data is due, data is expected to show a rise at a 2.2% annual rate. Several FOMC members are scheduled to speak. Also, US President Trump will meet again with North Korean leader Kim Jong-un. 

USD/JPY Near last week highs 
 
Earlier today, USD/JPY bottomed at 110.35 (20-day moving average), the lowest in a week but rebounded erasing daily losses. Now the pair is testing again the 111.00. If it managed to post a close on top it would gain strength to climb to the 100-day moving average at 111.45; above the next resistance is seen at 111.75. On the flip side, below 110.20/30, the US dollar is likely to extend losses. The next relevant support might be seen at 109.75.