- USD/JPY extended spike to hit 2 1/2 week highs of 111.95 on Tuesday's trade after BoJ disappointment.
- The Bank of Japan offered a dovish statement and added new forward guidance on interest rates, stating that rates would be kept ‘extremely low’ for an ‘extended period’.
- Meanwhile, the dollar was buoyed on the strong Conference Board Consumer Confidence which arrived at 127.4 vs 126.0.
- Adding further support was Bloomberg headlines that said that the U.S. and China are trying to restart talks to avert a full-blown trade war.
- The following events and data from U.S. will be in focus for further impetus: ADP private employment, ISM manufacturing index, FOMC meeting, Vehicle sales.
- No major developments are expected at the July/August FOMC meeting.
- Post-meeting statement will be in focus for future guidance after Powell’s remarks at his semiannual testimony.
- Technical indicators support upside in the pair. Price has bounced off 55-EMA support and has broken above 21-EMA.
- Close above 21-EMA has raised scope for further upside. We see scope for test of 78.6% Fib at 112.57 ahead of 113.10 (trendline)
Support levels - 111.40 (converged 5-DMA and 21-EMA), 110.87 (61.8% Fib), 110.66 (55-EMA)
Resistance levels - 112, 112.57 (78.6% Fib), 113.18 (July 19 high)
FxWirePro Currency Strength Index: FxWirePro's Hourly USD Spot Index was at 31.674 (Neutral), while Hourly JPY Spot Index was at -176.386 (Bearish) at 0345 GMT. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex.
