USD/JPY stuck in tight range sub-112, FOMC minutes eyed

USD/JPY continues to move back and forth in a 25-pips slim range, with persistent selling pressure seen just ahead of 112 handle, while downside remains cushioned well above 200-SMA support located at 111.60.

USD/JPY awaits FOMC minutes

The spot reversed almost quarter of the sell-off witnessed last week, and now consolidates near five-day highs in tandem with the US yields, as investors brace for the next risk event for the spot, the FOMC minutes.

The treasury yields rallied hard in the US last session, on the back of US Treasury's Mnuchin's comments, when he said that he hopes to get tax reform completed this year. Moreover, odds of a June rate hike rising further to 83% from 78% seen earlier this week also boosted the US yields across the board, sending the greenback broadly higher.

Over the last hours, cautious to mixed market sentiment amid China downgrade news and higher oil prices continue to keep a check on the prices. Next of note for the major remains the US existing home sales data, as traders await the sentiment on the Wall Street for fresh momentum ahead of the Fed minutes release.

USD/JPY Technical levels                 

Slobodan Drvenica at Windsor Brokers Ltd noted: “Today’s break above 111.81 pivot (daily cloud top / Fibo 38.2% of 114.36/110.23) was bullish signal but the rally was so far capped by falling daily Tenkan-sen line (112.05), showing hesitation at psychological 112.00 barrier. In addition, a plethora of barriers that lies above and consisting of 10SMA (112.26); 20SMA (112.42) and 100SMA (112.58) may limit recovery rally.”

Daily studies are mixed and see minimum requirement on close above daily cloud to signal further upside. However, lift above daily MA barriers is needed to confirm bullish continuation. Otherwise, risk of recovery stall and fresh weakness could be expected on early upside rejection,” Slobodan added.