USD/JPY - 113.00 handle is a tough nut to crack, T-yields drop

USD/JPY is fast losing altitude, now trading at 112.76 after spending entire Asian session and early European session battling the bears above the psychological level of 113.00.

Treasury yields drop

The yield on the 10-Treasury note is down 1.2 basis points. More important, the curve (spread between the 10-yr yield and the 2-yr yield) continues to flatten. It currently stands at 77.6 basis points; the narrowest since August 2016.

The Fed December rate hike has been priced-in as well. Furthermore, there is plenty of event risk today - Catalan President Puigdemont's decision and Brexit Summit. Consequently, the Yen and Treasury prices are likely to stay bid on haven demand.

Only continuation of the record rally in the US stocks could ensure the USD/JPY cuts through offers above 113.00 handle. Looking ahead - the focus will be on the US stocks, treasury yields and US data releases - jobless claims and regional manufacturing indices.

USD/JPY Technical Levels

The immediate support is lined up at 112.72 (Sep 21 high), which, if breached, shall open up downside towards 112.43 (10-DMA) and 112.38 (5-DMA). On the higher side, a 4-hour close above 113.00 would open doors for a sustained rally to 114.18 (early July high) and 114.49 (July high).