USD/JPY is set to post a third day of gains, the longest winning streak in five months. The pair was boosted by a stronger dollar and a fourth day of gains in US Treasury yields while the rally in US equities stalled out near record highs.
The 10-year yield extended higher last offering a yield of 2.192%, up about one percent from yesterday’s close to trade at a two week high. The US Dollar index (DXY) advanced higher after a struggle at 91.92 resistance yesterday. The level marks the 2016 spike low which was a multi-year low ahead of a break lower earlier this month. The bullish break signals the potential for a broader recovery.
The S&P 500 was last seen trading virtually flat. The index has broken to record highs this week and is consolidating near highs today.
The Bureau of Labor Statistics reported a rise in the producer price index for August of 0.2% which was below the analyst consensus for a gain of 0.3%. The data triggered a brief dollar decline at which point the greenback reversed and was bid steadily against most of its major counterparts. The dollar gained against all the major currencies in European trading, posting the largest gain against the New Zealand dollar.
The BLS will release CPI figures on Thursday which will likely be the most important data release for the greenback this week. CPI figures have fallen short on a monthly basis in the past five readings although analysts are looking for an improvement in August, expecting a rise of 0.3% after a gain of 0.1% in the prior month.
USD/JPY briefly touched a three-week high today but gains have been capped at a horizontal resistance level at 110.66. The level was previous support in late March and early April and has held the exchange rate lower on two prior attempts since mid-August. A bullish breach exposes 111.63 which was important support in February.
Support for the pair is found at the psychological 110.00 handle followed by 109.68 which held the pair higher following the gap up as a result of the French elections in April.