USD / JPY clings to gains near daily highs above 109.50 region

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  • USD / JPY gains some positive traction on Tuesday and recovers some of the previous day’s losses.
  • Risk appetite in the markets weighs on the safe-haven JPY and provides a modest boost to the pair.
  • The rally in US bond yields continues to support the pair’s upward movement; a modest weakness in the USD limits it.

The pair USD/JPY moves higher at the start of the European session on Tuesday and remains at the upper end of its daily trading range, around the region of 109.70.

The pair has captured some buying at lower levels on Tuesday and has picked up a part of the previous day’s sharp rejection drop from the key psychological level of 110.00. A strong recovery in global risk sentiment it has weighed on demand for the safe-haven Japanese yen, which in turn has been seen as a key factor driving a modest rise in the USD / JPY pair.

The risk appetite in the markets has triggered a new rise in Treasury yields which has also contributed to the positive intraday movement. However, a softer tone around the US dollar has prevented the pair’s bulls from opening aggressive positions and limited the rise of the USD / JPY pair, which warrants some caution before positioning for additional gains.

In the meantime, expectations of an imminent Fed announcement they could continue to act as a tailwind for the USD. Therefore, any drop towards the 109.30 region could still be seen as a buying opportunity. This, in turn, should help limit the decline for the USD / JPY pair, while the market’s focus remains on the outcome of the two-day FOMC meeting.

The Fed is scheduled to announce its decision during the US session on Wednesday and is widely expected to leave monetary policy adjustments unchanged. Investors will therefore be looking for clues as to the likely timing of the Fed’s tapering plan, which will influence short-term USD price dynamics and could generate further directional momentum to the USD / JPY pair.

USD / JPY technical levels

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