USD/JPY traders are not too sure whether or not to follow yields lower
The pair appeared to be finding some sense back on Friday and in early trades today, opening lower at around 111.22 amid the risk-off mood in the market.
However, buyers leaned on support around the 38.2 retracement level @ 111.25 to keep the pair afloat and test minor resistance around 111.62.
Since then, the pair has been tracking around 111.50-60 despite the market being in risk-off territory until now. Treasury yields are also slipping further but that hasn't really translated into much movement across yen pairs to start the session.
It is still a case of traders not sure of whether to follow the technical break higher or to stick with what is familiar to them i.e. risk-off = stronger yen.
At this stage, I'd watch for the 112.00 level and further resistance around 112.23 and 112.40 for any further signs of divergence between the yen and yields. As for downside pressure, the 100-hour MA (red line) @ 111.16 will be a key one to watch.
