EUR/JPY - Germany-Japan yield differential favors a bullish move

• EUR/JPY awaits upside break of 100-pip range.
• Widening yield spread favors bullish break.

EUR/JPY has been stuck largely in a 100-pip range of 135.00-136.00 since Jan. 15, but an upside break could happen soon, suggests the widening yield differential.

The 10-year German-Japan yield spread has increased to 53 basis points today; the highest level since mid-August 2014. Further, the daily RSI is above 50.00 and beginning to rise.

Hence, the cross will likely hold above 136.00 this time and may extend gains further. Still, caution is advised as over the last ten days, the pair has repeatedly faded spike above the psychological level of 136.00.

Yield spread chart

EUR/JPY Technical Levels

A close above 136.00 (psychological level) would open doors for 136.64 (Jan. 5 high) and 137.00 (range breakout target). On the downside, breach of support at 135.57 (session low) could yield 135.18 (Jan. 19 low) and 134.92 (Jan. 24 low).