USD/JPY clings to strong gains near 113.70 level ahead of Fedspeak

Persistent US Dollar demand lifted the USD/JPY pair beyond mid-113.00s to a three-day high level, coinciding with the 113.75 resistance area. 

The greenback continued to gain traction across the board as markets now seemed convinced that the Fed would eventually move towards raising interest-rates, as early as at its next monetary policy meeting in March. Late Monday comments from the Philadelphia Federal Reserve Bank President Patrick Harker further reinforced market expectations and turned supportive for the strong bid tone surrounding the major.

Moreover, the prevalent buoyant sentiment surrounding European equity markets pointed towards improving investors' risk-appetite and is further weighing on the Japanese Yen's safe-haven appeal, eventually collaborating to the pair's up-move for the second consecutive day.

Fedspeak would remain in focus during NY trading session on Tuesday and would be a key determinant of the pair's move ahead of the much awaited FOMC meeting minutes on Wednesday.

Technical outlook

Omkar Godbole, Analyst cum Editor at FXStreet notes, “the rebound from the descending trend line support on Friday if followed by a daily close above 50-DMA of 114.93 would add credence to the bullish DMI crossover and open doors for a rally to 118.66 (Dec 15 high). The ADX is sloping downwards, suggesting a weak momentum. Thus, there is need to be cautious so long as the spot is below 50-DMA.”

“On the lower side, breach of the session low of 113.11 could yield a pull back to trend line support around 112.34. Note that such a move would lead to another failure on the part of the RSI to break above 50.00 levels.”