- USD/JPY in a tight range on the 108 handle ahead of the Fed.
- USD/JPY's resistance up in the 109.30's are in focus.
USD/JPY is steady in the Tokyo open on Tuesday, having been in a chop overnight in the los 108s before scoring a fresh high in the 108.37 earlier. It was not a particularly eventful session overnight as markets get set for the Federal Reserve interest rate decision, but the Dollar was on the back foot for the best part of the day.
As for yields, the US 2-year treasury yield fell from 1.76% to 1.73%, while the 10s fell from 1.84% to 1.81%. "The FOMC meeting has started and will announce its decision in around 24 hours’ time, a 25bp cut widely expected. Money market rates have risen recently, though, causing the Fed to inject cash into the system overnight using treasury repos for the first time since 2008," analysts at Westpac explained.
Trade relations improving
Meanwhile, US industrial production climbed 0.6% in August against the 0.2% median expectation which was the largest monthly gain since August 2018. In other related news, an ‘initial’ trade agreement between the US and Japan has been agreed. "Trump advised Congress that this initial deal would be signed in the coming weeks. Details are yet to be released as to what this deal entails but agriculture products are expected to feature," analysts at ANZ Bank explained.
"There is also a glimmer of hope US relations with China will improve. Trade delegates will return to the negotiating table on Thursday for their 13th round of talks. Soybean exports to China have resumed with the USDA advising yesterday 260,000 tonnes of soybeans have been sold to China this month."
USD/JPY's resistance up in the 109.30's are in focus. "Short-term the cross is likely to consolidate a little around the 50% retracement at 108.43," analysts at Commerzbank explained.
"It spent the day consolidating just above a mild-bullish 20 SMA, while technical indicators hold above their midlines, but without directional strength. The same chart shows that the 100 SMA advances above the 200 SMA, both below the 107.00 level. The pair could find some directional momentum with the Fed, with the bullish case set to remain in place as long as it holds above 107.45. The natural bullish target is August high at 109.31, although the Fed´s decision is in the way, and could well be a game-changer for the dollar."
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