USD/JPY: Equilibrium above 113.10 absolutely critical

The recovery in the pair is set to face a major battle between 113.00/113.10, where a confluent high-interest area comes at. On the hourly, it’d constitute a test of resistance within the context of 2 pushes down, so theoretically, we would still be missing a final 3rd push to the downside. The bearish outside weekly candle supports the notion of a bearish extension.

From a valuation perspective, the risk-off conditions witnessed this week should play out well into the hands of sellers. Also note, the US vs JP 5-yr yield spread, as a barometer of risk and the Fed’s rates outlook, has made lower lows while the pair is still dealt well above its previous swing low of 111.50. Same applies for the risk index (in black line), making new lows yet the price is diverging.