USD/JPY: holding above the bearish alignment of the 50 and 21-hourly SMAs

• USD/JPY is stabilising during the US session in the 111.20's and holding above the bearish alignment of the 50 and 21-hourly SMAs at 111.23 by the skin of its teeth.
• The pair has broken up through the descending resistance of yesterday's early Asian high of 111.51 while the long bullish daily candle wick casts a technically positive outlook for the pair in the immediate future. 

USD/JPY was once again offered in Asia yesterday, once in the Tokyo open, (again), from the Tenkan 111.50's down to 111.05 where bulls drove the price back to 111.45 before the second wave of supply thrashed out the non-committed bulls down to a late London low of 110.95. 

US yields were on the rise and the Wider 10-year UST-JGB spread helped USD/JPY rally yesterday back into the key Tenkan 111.50 area from the Trumpafied lows down at 110.75. Not only was Trump seeming to mastermind a currency war between the EU and China, but, yesterday,  he also kicked up the geopolitical angst again between US and Iran relations when he issued a furious, all-caps challenge to the Iranian regime late Sunday night, warning that any threats to the US would be met with unspecified dire consequences. 

Trump said in a Sunday tweet and put in capital letters that Iranian President Hasan Rouhani would "SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE." Iran has responded with threats of its own - Iran's Foreign Ministry said there would be "equal countermeasures" if the U.S. pushes ahead with attempts to block Iranian oil exports.

Markets taking geopolitical tensions in its stride, focusing on central bank divergences instead

• USD/JPY: To rise above 112 if BoJ keeps policy unchanged - Danske Bank

However, the market has not paid too much attention to this war of words that we have seen before and are not seeing this as such a dangerous impasse at the moment. Instead, traders are concentrating on the yield spread and the central bank divergence, disbelieving the speculation that the BoJ is about to tweak their monetary policy at next week's meeting. The DXY has been clawing back from the opening price in NY, (-0.16%) and has moved higher towards flat at -0.02%. 

USD/JPY levels

The daily Kijun line and the uptrend line off the June 26 and July 9 lows remain as a congested resistance zone between 111.40/55. The 200-week moving average is located at 113.22. This is where the 61.8% of the 2016-18 drop at 113.27-28 is located. Then, the 114.73 November 2017 high comes into play.  On the flipside, the 50-D SMA comes in at 110.51 and the 200-D SMA at 110.10 before the Tenkan prop which is down at 109.19.