US Bonds were trading lower in the last two sessions after the minutes of the Federal Reserve showed that most policymakers still favor a tapering program this year. But sell-off on bonds came on news that QE could end in mid-2014. USD was firstly down on the news, but then it recovered during the Asian trading hour. However, EUR/USD is again finding some bid, so no real direction at the moment. Meanwhile the S&P Futures are rallying.

I am looking at the 10-year US notes where I suspect that prices are moving lower into wave B that is part of a larger three wave rally on a daily chart. Wave B could reach levels around 124-124.50 so there is room for more weakness. If weakness will resume, then US yields will rally which will support the USD/JPY.

On USD/JPY I can see some reversal to the upside but still need to wait more, especially if we also consider that on 4h chart price is now testing upper trend line of a downward channel. We definitely want to see a breakout here to confirm bullish waves.

Forex Analysis by Gregor Horvat at ForexPros. com