USD/JPY: risk-off start in Tokyo, buy dips on 113 handle?

USD/JPY is currently trading at 113.78 with a high of 114.15 and a low of 113.75.

Japan PM Abe protests North Korea missile tests

USD/JPY has dropped in the Tokyo open during a subdued open for Asian equities. The yen is bid on the back of the weekend news and N.Korea firing four missiles into the East Sean with three landing in Japan's exclusive economic zone. Other news from China over the weekend reported that the nation reduced its growth target which is another weight on the major risk-off pair. 

Meanwhile, the week ended with Fed Chair Yellen's speech that signalled a March hike as likely but only gradualism beyond. this lead to US interest rates peaking after the speech, falling into the close along with the USD that closed 0.7% lower.  Market pricing for a March hike did firm though, April Fed fund futures at 0.86% implying around a 95% chance of a rate hike in March - a week ago the probability implied by the fed funds futures was only 40%. 

What could prevent a March hike? - Rabobank

"For many in the markets the Fed’s hiking plans are seen as a stamp of approval for the Trump rally. Today, Chair Yellen said that at the FOMC meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with expectations, in which case a further adjustment of the federal funds rate would likely be appropriate," explained analysts at Rabobank, adding, " Shortly before her speech, the implied probability of a March hike stood at 88%, afterward it had risen to 96%."

USD/JPY levels

Valeria Bednarik, chief analysts at FXSteet explained that from a technical point of view, the daily chart shows that the price has recovered above a bullish 100 DMA, now the immediate support at 113.50, but also that technical indicators lack upward strength, and hover within neutral territory. "In the 4 hours chart, technical indicator have pulled down sharply from overbought levels, with the Momentum poised to enter negative territory, whilst the 100 and 200 SMAs converge at 113.25, providing a not so strong support due to the lack of directional strength. February's high stands at 114.95, and the pair needs to settle above it to be able to shrug off its negative tone."

USDJPY: Buying dips towards 113.00