USD/JPY catches a bid wave at Tokyo open, eyes Fed decision

Having steadied above 1h 200-MA in the last few hours, the USD/JPY is gathering upside traction at Tokyo open.  

The pair has gained 10 pips or so trade at 113.75 and the US 10-year treasury yield is up one basis point at 2.385 percent. Both USD/JPY and the 10-yr yield traded in the sideways manner in the US session. Analysts at Westpac write, "US 10yr treasury yields ranged sideways between 2.36% and 2.38%, while 2yr yields rose from 1.57% to 1.59%. Fed fund futures yields remained elevated, pricing the chance of a December rate hike at 96%."

The data released yesterday showed the US consumer confidence rose to a 17-year high of 125.9. Still, the 10-year yield remained below the critical resistance of 2.4 percent.

All eyes are on the Fed

The Fed is widely expected to maintain the status quo today and set the stage for a 25 basis point rate hike in December.

Kathy Lien from BK Asset Management says, "the dollar will rise into and on the back of the FOMC rate decision" and adds, "the Fed needs to be unambiguously hawkish in order to avoid a sell-off in the dollar.  If anyone dissents and favors an immediate tightening, the dollar will rise with USD/JPY taking aim at 115 if there are 2 or more dissents."

USD/JPY Technical Levels

Jim Langlands from FX Charts writes-

"Technically, the momentum indicators look mixed/flat, so a fairly nimble stance is required. On the downside, support will be seen at the session low (112.95). A sustained break of 113.00 would see us back in the previous 112/113 range, where 112.75 would be the first level of support ahead of 112.30. On the topside, back above 113.70 would find offers at 113.85 and again at 114.00. Above there, minor resistance will be seen at 114.20/25, above which 114.45/50 is an increasingly strong hurdle to overcome. There are some big option expiries at 114.00/114.50 coming up over the next couple of days so I do not really see the dollar much above 114.50 but if wrong look for a run up to 115.00."