USD/JPY basing circa 103.00 below key daily cloud at 103.25

USD/JPY has started out the week with bulls attempting to recover the sell-off from 103.91 has taken back the 103 handle. 

Markets are vulnerable this week with it being U.S. earnings season which could be a negative to stocks and a positive to the yen. The S&P will be the barometer to watch in that respect while analysts at Brown Brothers Harriman (BBH) explained that technical indicators underscore the vulnerability of the S&P 500. "Initial support is seen ahead of 2140.  A break warns of a test on last month's low, set near 2119. "

Meanwhile, yield spreads are an increasingly sensitive aspect in the FX space and the analysts at BBH  noted how US interest rates had risen ahead of Friday's U.S. jobs report, explaining that whatever disappointment there was with the data, interest rates did not pullback. "The US 10-year yield is near a four-month high 1.75%, having risen for six consecutive sessions. The 2-year yield has a similar streak at and 85 bp is near a four-month high.  We expect a consolidative period."

USD/JPY levels

USD/JPY needs to get back above the top of the daily cloud at 103.25 for a compelling bullish outlook while to the downside, with a target of 104.32 as the September high. "Longer term we suspect that the market is basing and target the 107.49 July high and the 200 day ma at 108.30 at this stage," explained analysts at Commerzbank, while suggesting that 102.50 is a key support area.