FOREX-Yen under pressure, major chart levels tested

Thu Jul 18, 2013 7:29pm EDT

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By Wayne Cole

SYDNEY, July 19 (Reuters) - The U.S. dollar was again probing major resistance against the yen on Friday, encouraged by solid economic data, higher Treasury yields and an unthreatening conclusion to testimony from Federal Reserve chief Ben Bernanke.

A broadly firmer dollar was up at 100.55 yen, having bounced 0.8 percent on Thursday, to clear a chart hurdle at 100.50.

"The 100.75 area is the key initial pivot as breaks should set the stage for another run at last week's high (at 101.53)," said analysts at JPMorgan.

"The yen underperformance led to a bullish shift for the crosses implying additional upside can develop as well."

The euro broke above the key 131.30/75 area to reach a seven-week peak at 131.89 yen, with the next stop being resistance in the 132.60/132.86 zone. The pound was also testing an important barrier at 153.00 yen as was the Canadian dollar at 97.40.

The dollar was otherwise sidelined on the euro at $1.3106 and a shade firmer against a basket of major currencies at 82.799.

The drop in the yen could help Japanese shares higher on Friday, offsetting disappointing results from Microsoft and Google. The yen is inversely correlated with Tokyo stocks and gains in one tend to fuel losses in the other.

Investors are also focusing on Japan's upper house elections on Sunday with opinion polls pointing to a big win for Prime Minister Shinzo Abe's LDP.

Analysts hope that winning a clear majority will embolden Abe to push ahead with structural reforms to revive the economy, though there is also a fear that a clean sweep could actually lessen pressure for tough action.

"Under a landslide LDP victory, we would expect USDJPY to rally, though we would be looking to take profits at 103," wrote analysts at Barclays in a note.

However, with expectations so high, anything less than a sweeping victory could see the yen bounce come Monday, they added.

Supporting the dollar was news Moody's had changed the U.S. sovereign outlook to stable from negative and affirmed its triple-A rating, removing the threat of a downgrade.

Data on jobless claims and the Philly Fed manufacturing survey was also upbeat, enough to lift 10-year Treasury yields around 4 basis points to 2.53 percent.

Finishing his likely last appearance before Congress, Fed Chairman Bernanke said the run of economic news had been mixed and it was too early to say when it might start tapering its asset buying.

There is little in the way of major economic data out of Asia, or the U.S., on Friday, while finance ministers and central bank heads of the Group of 20 meet in Moscow.

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