USD/JPY: Yen to stay firm on Fed hike prospects this month?

FXStreet (Guatemala) - USD/JPY stabilizing as we progress through the session, after a series of up-day's since Black Monday, the pair has started out better offered and down to test the vicinity of the 121.00 figure.

The more positive underlying tone in the US economy is allowing Central Bankers at the Fed to stay on course in respect to an interest rate, while 10-year Treasuries have already bounced from sub-2% to 2.18% on the back of China selling their FX reserves and turning to a net seller of US debt which may be taken into consideration at this month's FOMC meeting and may continue to be an additional support line to USD/JPY.

However, as markets start to price in a potential rate hike again on the back of a hawkish weekend of Fed's Fisher and the Jackson Hole, the Yen may come under-demand as stocks tail off, of which we have started see in the open today. S&P futures are down 1.13% at time of writing. The key 200 DMA at 120.70 could be used as an indicator of the market's risk appetite while the price scored through this level on risk appetite returning to markets last week. There is a series of top-tier data for the US economy with the Nonfarm Payrolls report at the end of the week as the key focus.

USD/JPY starting out bearish

USD/JPY is in bullish territory having crossed above the 120.70 200 DMA. 125.84 is the upside target as June highs. 123.20/30 could be a tough resistance, May 25th highs on the commencing rally out of the 4.5 month sideways channel and also comes in the vicinity of the 50 DMA. To the downside, the key support level is 118.00/50. Daily MACD is highly negative and the price recently penetrated down through the weekly 50 SMA at 119.51.