USD/JPY: bulls continue higher out of the short term descending triangle

• USD/JPY has started out in Tokyo breaking up out of the descending near-term resistance line established from three lower highs made overnight.
• USD/JPY has formed a descending triangle pattern on the short time frames having recovered from the double bottom lows of 112.30. 

USD/JPY has been in a correction of the sell-off of the 12th Nov highs up at 114.20 here the price fell to a low of 112.30 overnight. Markets were mixed with plenty of risk-off trade during the European and US sessions where equities gapped lower on the open and remained heavy in NY. Eyes were on oil prices and tech stocks falling over yet again, although there was not any real catalyst that sparked further declines in sentiment. Instead, investors are continuing to reign in risk and remain concerned over global growth.

• Wall Street fails to stage a recovery as crude oil sell-off weighs on sentiment

There has been some selling, however, when Trump’s statement in support of Saudi Arabia hit the wires. Trump said that “Saudi Arabia is the largest oil producing nation in the world. They have worked closely with us and have been very responsive to my requests to keeping oil prices at reasonable levels.”  This did little to prop up the price of oil that was extending its downside on Tuesday.  USD/JPY, however, went on to rise from 112.30 to 112.70, supported by resilient US yields and a broadly stronger greenback.

As analysts at Westpac noted, "US 10yr treasury yields fell only 1-2bp net, to 3.05%, while 2yr yields held around 2.79%, a very steady performance given the drama in equity and commodity markets. Fed fund futures yields priced the chance of another rate hike on 19 December at 70%."

USD/JPY levels

• Support levels: 112.55 112.00 111.65.
• Resistance levels: 112.95 113.35 113.70.

Valeria Bednarik, Chief Analyst at FXStreet explained that the current recovery falls short from changing the negative tone present in the 4 hours chart:

 "The pair is developing below its 100 and 200 SMA, as technical indicators are correcting oversold conditions, heading higher but still below their midlines."

"The 100 DMA remains as a key support around 112.00, the barrier bears need to break to take over the pair. In the 4 hours chart, the 100 SMA maintains its bullish slope around 113.35, acting as bullish breakout point."