USD/JPY trims gains as US dollar retreats

A weak US dollar across the board pushed USD/JPY back toward the level it closed on Friday. Stocks in the US also retreated. The Dow Jones printed new record highs and still remains in positive territory (+0.25%) but it moved away from the highs; US bond yields also pulled back into neutral territory for the day. 

USD retreats, exhaustion?

USD/JPY bottomed at 112.86 during the Asian session and then soared, climbing almost 200 pips. It peaked at 114.77 after the beginning of the American session. During the last three hours, it pulled back and it was trading at 113.60, around Friday’s closing price. 

Today again USD/JPY was rejected from above 114.50 and made a reversal. “Technical indicators are beginning to flash a yellow light, suggesting caution is in order. Perhaps a tell was that for the first time in a year, the speculators in the futures market as of last Tuesday we net short yen”, said analysts from Brown Brothers Harriman. 

According to them the RSI and Slow Stochastics did not confirm last week's dollar highs and the bearish divergence may make momentum traders a bit cautious.