USD/JPY: 61.8 percent Fib hurdle holds ground

• USD/JPY failed to cut through 110.04 - 61.8 percent Fibonacci retracement.
• Focus on US-China trade talks.

The USD/JPY pair failed to take out the resistance at 110.04 (61.8 percent Fibonacci retracement of Jan-March sell-off) yesterday and fell back to 109.57 in the Asian session today.

Currently, the spot is trading at 109.68. The Fed held interest rates steady as expected, acknowledged rising inflation, but gave no indication that officials plan to raise rates at a faster rate. Consequently, the 10-year treasury yield did not a much post-Fed decision, leaving the USD/JPY vulnerable to a technical pullback.

As of writing, the 10-year yield is flat-lined around 2.97 percent but may drop sharply if the US-China trade talks falter, leading to a broad-based risk aversion. In such a case, the USD/JPY could feel the gravitational pull.

On the other hand, if the talks go well, the yield could rise above the 3 percent mark and the USD/JPY could revisit and possibly break above 110.04.

USD/JPY Technical Levels

A break above 109.88 (session high) would allow re-test of 110.04 (61.8 percent Fibonacci retracement). A close higher would expose resistance lined up at 110.84 (Nov. 27 low). On the other hand, a move below 109.47 (Apr. 26 high) could yield a pullback to 109.15 (ascending 10-day MA) and 109.00 (psychological level).