USD/JPY inches higher toward 113, looks to record its highest daily close in more than 2 months

BOJ's Kuroda says monetary policy won't change with inflation staying half-way of the target.
US Dollar Index fluctuates in tight range ahead of FOMC.
Rising US T-bond yields push USD/JPY higher in the NA session.

Eren Sengezer FXStreet

Although the dollar is struggling to make a meaningful recovery on Tuesday, the USD/JPY remains on track to end the day at its highest level since July 19. As of writing, the pair was trading at 112.94, adding 0.12% on the day.

Earlier today, the JPY weakened against its rivals after the Bank of Japan governor Kuroda stated that there wouldn't be any changes in the monetary policy with the inflation staying half-way to their target and added that the bank could ease more if needed. Following the initial market reaction, the pair lost its traction as the greenback struggled to find demand ahead of tomorrow's crucial FOMC event.

"At this point, it would be a significant surprise if the FOMC did not raise interest rates at the upcoming September meeting. The economy has remained strong, supported by substantial fiscal stimulus. Recent FOMC minutes and participant comments all point to another step in removing accommodative policy," Nomura analysts said previewing this week's meeting.

Nevertheless, another sharp upsurge witnessed in the 10-year US T-bond yield provided an additional boost in the NA session to the pair and lifted to it closed to the 113 mark. At the moment, the 10-year T-bond yield is up 1% on the day at 3.11%.

Today's data from the United States showed that the consumer confidence continued to improve in September and housing prices increased in line with market expectations. The US Dollar Index, which tested the 94 level earlier in the day, was last seen down 0.15% on the day at 94.12.

Technical levels to consider

The initial resistance for the pair could be seen at 113.15 (Jul. 19 high) followed by 113.75 (Dec. 12, 2017, high) and 114.30 (Nov. 7, 2017, high). On the downside, supports could be seen at 112.70 (daily low), 112 (psychological level) and 111.65 (Sep. 17 low).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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