USD/JPY finds support near 112 handle as DXY stages modest recovery
The USD/JPY pair started the day under pressure on Tuesday as investors sought refuge in traditional safe-havens such as the JPY amid rising geopolitical tensions between the United States and North Korea. The pair refreshed its lowest level since September 26 during the European trading hours at 112 before retracing a portion of its losses in the second half of the day. As of writing, the pair was trading at 112.30, losing 40 pips, or 0.35%, on the day.
In addition to the risk-off mood, a broad-based selling pressure witnessed on the greenback weighed on the pair as well. Before the FOMC releases the minutes of its September meeting on Wednesday, investors seemed to be hesitant to pile up their long USD positions, pushing the US Dollar Index down to a daily low at 92.97. Nonetheless, the index didn't have a difficult time rising above the 93 mark and was last seen at 93.10 still losing 0.5% on the day.
- Fed ready to hike in December – UOB
On the other hand, major equity indexes in the U.S. started the day on a positive note and surged to fresh record highs led by robust gains in retail giant Wal-Mart and energy shares, not allowing the risk-sensitive JPY to gather further strength.
In the early Asian session on Wednesday, the economic docket from Japan will feature machinery orders data, which is expected to rise by 0.8% on a yearly basis in August following a 7.5% contraction in July. However, the price action could remain subdued ahead of the FOMC.
- USD/JPY further consolidation expected – Commerzbank
Technical outlook
"Technically, the pair has been oscillating within a broader trading range over the past two-weeks and hence, it would be prudent to wait for a decisive move in either direction before committing to the pair's next leg of directional move," notes Haresh Menghani, Financial Markets Analyst and News Editor at FXStreet.
The first technical support for the pair could be seen at 112.00 (daily low/psychological level) ahead of 111.40 (200-DMA) and 111.10 (100-DMA). On the upside, resistances align at 112.80 (daily high), 113.45 (Oct. 6 high) and 114.50 (Jul. 11 high).