USD/JPY taking on overnight highs, next stop 114.45?

Currently, USD/JPY is trading at 114.05, up 0.36% on the day, having posted a daily high at 114.17 and low at 113.64.

Dollar Index holds at 7-week high as Fed doves turn hawkish

The Risk sentiment rallied overnight on the back of Trump’s speech to Congress and Fed speak. Trump was bullish and the Fed speakers have been hawkish. The S&P500 was gapping 1.4% at the start of the US day to a fresh record high and closed +1.37% or +32.32 points ending at 2,395.96. US 10yr treasury yields rose from 2.40% to 2.47% overnight, while 2yr yields consolidated yesterday’s gains. The USD/JPY rose to 114.05 overnight as markets price in the Fed's find rate higher with the April contract now at 0.825% implying around an 80% chance of a rate hike in March up from 50%.

US data: a case for higher US rates - ANZ

Analysts at Westpac offered a data recap from the US session:

"In the US personal income report for Jan, income was slightly stronger (0.4% vs 0.3%) and spending was slightly weaker (0.2% vs 0.3%) than expected. The core PCE deflator, favoured by the Fed as an inflation gauge, remained at 1.7% yoy. ISM manufacturing was solid (57.7 vs 56.2), which had earlier been flagged by the regional PMIs. Note that new orders rose a strong 4.7pts to 65.1 but the employment and prices sub-indices were weaker, prices at 68 from 69 while employment fell from 56.1 to 54.2. The Fed’s Beige Book of regional economic conditions reiterated the “modest to moderate” expansion remained on track."

USD/JPY levels

USD/JPY has matched the overnight highs with a spike in the Tokyo open with next resistance at 114.40 and 114.85. "TTechnical readings in the 4 hours chart indicate that the pair may correct lower, as indicators are retreating strongly from overbought levels, but the price has recovered above its 100 and 200 SMAs, with the largest at 113.30, and offering an immediate support," noted Valeria Bednarik, chief analyst at FXStreet explaining that the risk will turn towards the downside in the short term, on a break below 113.00.