- USD remains bid vs. its main rivals on Tuesday.
- US 10-year yields advance above 2.92%, daily tops.
- Activity in US markets return after Monday holiday.
The buying interest around the greenback stays well and sound during the first half if the week and is now pushing USD/JPY back above the critical 107.00 handle, recording fresh daily highs at the same time.
USD/JPY focused on risk trends, FOMC
The pair is confirming a positive start of the week and extending the bounce off multi-month lows in the mid-105.00s recorded last Friday.
Domestic pressure from Japanese exporters in light of the recent appreciation of JPY coupled with increasing risk-on trade has combined with the better sentiment around the buck to lift spot to new 4-day highs beyond 107.00 the figure today.
It is worth recalling that price action in spot has decoupled from the performance in US yields, particularly the in the 10-year note, which have recovered the top of the range around 2.92%.
Event-wise, the FOMC minutes are due tomorrow and investors will look for further details regarding the Fed’s plans for extra tightening via rate hikes for the current year. Recall that according to CME Group’s FedWatch tool, the probability of higher rates at the March meeting is now at more than 83%, based on Fed Funds futures prices.
USD/JPY levels to consider
As of writing the pair is up 0.54% at 107.17 facing the next hurdle at 107.67 (10-day sma) seconded by 108.55 (21-day sma) and then 110.48 (high Feb.2). On the flip side, a breakdown of 105.53 (2018 low Feb.16) would open the door to 102.54 (low Nov.3 2016) and finally 101.15 (low Nov.9 2016).
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