USD/JPY: where to from here, sitting pretty above trend line support?

• USD/JPY: a lot depends now on the next few sessions and key data releases, including nonfarm payrolls.
• USD/JPY sits above key support line, can it hold if yields are in decline?

USD/JPY is in consolidation above the rising support line while Tokyo is out for labour day and currently, USD/JPY trades at 109.10 with a high of 109.18 and a low of 109.02. 

USD/JPY has been consolidating the recent surge by the dollar that took the pair through key resistance levels and onto 109.54 recent highs. However, there was a drift lower at the end of last week and eyes are on the crosses that could be warning signals to equities given the recent spike in the yen despite dollar momentum building - (DXY is headed to a break of the 200-D SMA).

The US 10yr treasury yield touched 2.98% on the US data but then continued Thursday’s decline, noted analysts at Westpac where rates dropped to 2.96%, while 2yr yields were unchanged around 2.48%. 

Eyes looking to key US data this week

At the same time, however, the data contrasts are compelling, with the US GDP and CPI compared to that of Japan's and indeed the divergence between the two Central Banks is underpinning the bias towards the upside as well.  The week ahead will be key for the dollar with a good deal of ket data including the all-important nonfarm payrolls at the end of the week. 

"US GDP rose 2.3% annualised in Q1 (vs 2.0% expected), the positive result tempered by a clear softening in consumer-driven momentum from 2017. On the positive side, personal disposable income jumped a solid 3.4% (tax cut driven ), the core price measure rose 2.5% and business investment added +0.9pts," analysts at Westpac advised. 

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the Momentum indicator in the mentioned chart resumed its advance well above its mid-line, while the RSI retreats modestly from overbought levels, not enough to suggest further slides ahead. "In the 4 hours chart, the price holds far above bullish moving averages, while the RSI indicator bounced from its mid-line, albeit the Momentum entered negative territory with a downward slope, all of which maintains the bullish trend in place, but suggest a possible bearish correction on a break below 108.95, Friday's low and the immediate support."