USD/JPY flirting with session highs near 110.20, FOMC eyed

The now better momentum around the greenback is helping USD/JPY to advance to fresh daily highs in the 110.20/30 band.

USD/JPY focus on Fed

The pair has recovered the smile after Monday’s pullback, advancing since then through the 110.00 handle and currently toying with 2-day peaks near 110.30.

Spot has gathered traction despite yields of the US 10-year benchmark – the almost exclusive driver of the pair’s price action in past sessions - stay on the defensive for the second consecutive session so far today.

In the meantime, the buck stays firm ahead of the FOMC gathering due later in the European evening. Other than the (fully priced in) rate hike, the potential timing of a reduction of the Fed’s balance sheet and further tightening in the second half of the year should be in the centre of the debate today.

Further key events in the US docket include May’s inflation figures tracked by the CPI and retail sales. In Japan, the BoJ will hold its meeting on Friday, with consensus expecting no changes of the monetary status quo.

USD/JPY levels to consider

As of writing the pair is up 0.18% at 110.26 facing the next hurdle at 110.34 (23.6% Fibo of the May-June drop) followed by 110.61 (200-day sma) and finally 110.73 (high Jun.5). On the other hand, a breakdown of 109.60 (low Jun.12) would open the door to 109.36 (low Jun.8) and then 109.09 (low Jun.7).