USD/JPY clings to gains near 3-week tops, FOMC eyed for fresh impetus
| • A modest USD uptick helps build on the overnight bullish break through 200-DMA.
• Fading safe-haven demand and rising US bond yields supportive of the up-move.
• All eyes remain glued to the latest FOMC monetary policy update, due later in the day.
The USD/JPY pair continued scaling higher for the third consecutive session and built on the overnight bullish break through the very important 200-day SMA.
The US Dollar maintained its positive tone on Wednesday and lifted the pair to an intraday high level of 110.69, or 3-week tops, during the Asian session. Bulls also seemed to track a goodish pickup in the US Treasury bond yields, with fading safe-haven demand further collaborating to the ongoing bullish momentum.
Today's up-move could also be attributed to some follow-through technical buying, especially after Tuesday’s decisive close above a technically significant moving average resistance near the 110.15-20 region.
Further gains, however, might remain limited as investors turn cautious and refrain from placing aggressive bets ahead of the highly anticipated FOMC decision, due to be announced later during the New-York trading session.
A 25bps rate hike already seems fully priced in the market and hence, the key focus would be on policymakers’ updated economic projections, where hints of more than 3 rate hikes in 2018 should boost the greenback and assist the pair to build on the positive momentum.
Technical outlook
Omkar Godbole, Analyst and Editor at FXStreet writes, "a move above the recent high of 111.40 and a rally to 111.95 (long-term falling trendline) looks like a done deal."
"That said, a long-run bull breakout, i.e. an aggressive move above 111.95 could remain elusive unless the Fed revises the neutral rate forecast," he added further.
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