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  • US Dollar Index up for the second day-a-row looks stronger after reversal.  
  • Pair confirms rebound but remains capped by 20-day moving average.  
  • Key event ahead: US official employment report on Friday at 12:30 GMT.  

The USD/JPY pair remains flat moving near the 111.50 area after the bounce from 111.05 following the FOMC meeting, found resistance at 111.65.  

Yesterday, after Powell’s press conference the US Dollar rose sharply across the board and on Thursday extended gains. The pair peaked at 111.66 and then pulled back to 111.35 before going to sleep to the 111.50 area. “Initially, markets interpreted the IOER rate cut as a dovish twist but US yields ended higher and the USD stronger after Powell’s comment that the Fed is firmly on hold and not about to cut rates near term. We maintain our view that the Fed is on hold for the rest of this year and next”, said Danske Bank analysts.  

Today data was ignored by markets and the key event ahead is the US employment report due tomorrow at 12:30 GMT. NFP are expected to rise by 185K. According to analysts at TDS, USD is likely to focus on the mix of job and wage growth. “A downside miss on both could lead to some fresh consolidation in the FX market into the weekend. The key theme relates to the intersection of global growth and risk sentiment. Another focus now is whether the Fed plans to sit on the sidelines rather than follow OIS pricing that is looking for a cut. Our baseline would likely offer a quick sting to the USD, favoring EM over G10, especially for a print that shows a profile of decent growth and soft inflation”.  

Technical levels to consider

The rally of USD/JPY was capped before the 20-day moving average that stands at 111.70. The mentioned level it the critical resistance in the short-term. A daily close on top would point to a test of 112.00. The next resistance level might lie at 112.15 and 112.40. On the flip side, support level might be seen at 111.35 (Apr 25 & May 2 low), 111.20 (Apr 30 low) and 111.00/05 (May 1 low).