USD/JPY Forecast: Bulls eyeing the year high at 110.96

• Japans government extended the state of emergency until June 20.

• US Treasury yields are still the main motor for USD/JPY.

• USD/JPY could extend its advance in the upcoming sessions toward 110.96.

The USD/JPY pair hit 110.19 on Friday, its highest since early April, retreating afterwards to close the week with gains in the 109.80 price zone. The pair soared amid the prevalent dollar‘s demand, easing ahead of the close on the heels of lower US government bond yields. The yield on the benchmark 10-year Treasury note peaked for the day at 1.62%, settling at 1.58%. Meanwhile, Wall Street managed to close in the green, although gains were limited as higher US inflation figures weighed on the investors’ mood.

Japan published on Friday the Unemployment Rate, which rose to 2.8% in April, while Tokyo inflation printed at -0.4% YoY in the same month. Also, Prime Minister Yoshihide Suga officially extended the state of emergency to June 20. The country will kick-start the week publishing March Retail Trade, the preliminary estimate of April Industrial Production, and the May Consumer Confidence Index, foreseen at 35.3 from 34.7 previously.

The USD/JPY pair has chances of extending its advance, according to the daily chart, as it has settled well above all of its moving averages, while technical indicators are stable within positive levels. In the 4-hour chart, the risk is also skewed to the upside, as technical indicators corrected extreme overbought conditions before stabilizing well above their midlines. Moving averages remain well below the current level, with the 20 SMA maintaining its bullish slope above the longer ones. The pair could retest the year high at 110.96, although gains beyond the level are not yet clear.

Support levels: 109.75 109.30 108.90

Resistance levels: 110.20 110.50 110.95