USD/JPY Forecast: Bullish breakout still possible

• Japans Tokyo inflation data improved in June but held far away from healthy levels.

• Resurgent US Treasury yields helped USD/JPY recover ahead of the weekly close.

• USD/JPY is neutral in the near-term but poised to continue advancing.

The USD/JPY pair posted a modest daily decline on Friday to end the week with gains at 110.77. The pair fell to an intraday low of 110.47, bouncing from the level as US Treasury yields rose heading into the weekly close. The yield on the benchmark 10-year Treasury note hit 1.54% and settled at 1.52% after the US core PCE price index rose to 3.4%, the highest level since 1991.

On Friday, Japan published June Tokyo inflation figures, which was better than anticipated, but held far away from healthy levels. The Consumer Price Index managed to hold ground better than the expected contraction. On Monday, the Bank of Japan will publish the Summary of Opinions, including projections for inflation and economic growth.

From a technical perspective, the USD/JPY pair maintains its bullish potential intact. In the daily chart, the pair is trading above a bullish 20 SMA, which keeps advancing above the longer ones. The Momentum indicator keeps heading north within positive levels, while the RSI consolidates at around 61. The pair is neutral in the near-term, as, in the 4-hour chart, it has broken below a now flat 20 SMA, while technical indicators lost directional strength around their midlines. So far, the pair has been unable to sustain gains beyond the 111.00 level and would need to break above the 111.30 resistance level to recover its bullish momentum.

Support levels: 110.50 110.05 109.70

Resistance levels: 110.95 111.30 111.80